Differences between a debit note and credit note
Businesses use debit notes and credit notes as official documents for accounting sale return and purchase return transactions. These notes inform the buyer how much credit they have or how much further they owe to the vendor.
Debit note vs credit note becomes important to understand where business frequently deals with both scenarios. The understanding of terms could also vary from the perspective of the seller and buyer. But the following comparison is made in common business parlance.
Below is a comparative table of debit notes vs credit notes:
| Particulars | Debit note | Credit note |
|---|---|---|
| Who issues it? | The buyer of goods issues it. | The seller of goods issues it. |
| Meaning | The buyer of goods issues a debit note to the seller to return the goods received due to quality issues or other reasons. A debit note contains the reason for the return of goods. | The seller of goods issues a credit note to confirm that the purchase return is accepted. |
| Can be issued | It can be issued only in the event of credit purchases from the buyer's perspective. | It can be issued only in the event of credit sales. |
| Impact | It reduces account receivables in the books of sellers. | It reduces account payables in the books of the buyer. |
| Reflects | A debit note reflects a positive amount. | A credit note reflects a negative amount. |
| Form | It is another form of purchase return. | It is another form of sales return. |
| Accounting | It leads to updating purchase return books. | It leads to updating of sales return books. |
| Entry | Supplier Account Dr. Purchase return Cr. | Sales return account Dr. Customer Account Cr. |
| Issued in exchange of | A debit note is issued in exchange for a credit note. | A credit note is issued in exchange for a debit note. |
| Issued by a seller to the buyer | The seller issues debit notes to the buyer if the buyer is undercharged or the seller has sent additional goods. | The buyer issues a credit note as an acknowledgement of a debit note received. |
| Ink | It is issued in blue ink. | It is issued in red ink. |
Quick Summary
Debit notes and credit notes are used in accounting for sale and purchase return transactions, reflecting account receivables and payables. Buyer issues a debit note while the seller issues a credit note.
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