What is Credit Note?
A credit note is a document a seller issues to reduce what a buyer owes, usually because goods were returned or an invoice was overcharged.
Updated
Meaning
English
A credit note is a document a seller issues to reduce what a buyer owes, usually because goods were returned or an invoice was overcharged.
Roman Urdu
Credit note woh document hai jo bechne wala khareedar ka wajib raqam kam karne ke liye deta hai, aam taur par return ya zyada charge hone par.
Also called credit memo, return note, sales credit note.
Example
A distributor invoiced a retailer for 10 cartons but only 9 arrived. Instead of changing the original invoice, it issues a credit note for one carton, and the retailer's balance drops by that amount.
How it works
Once an invoice is issued, good practice (and tax law for registered businesses) says it should not be edited. Corrections are made with a separate document: a credit note reduces the amount due, and a debit note increases it or records the buyer's claim. Each carries its own number and refers to the original invoice.
For a shop, every customer return on a credit sale is in effect a credit note: the khata balance goes down. For sales tax registered businesses, credit notes also reduce the output tax of the period, under conditions set in the Sales Tax Act, 1990, so they must be recorded properly.
In Nafaa
A return in Nafaa is made against the original bill, so the customer's khata or the money returned is adjusted without editing the sale. The tax module's monthly report lists returns as credit notes with their tax, alongside the period's sales.
Related terms
- Debit Note
A debit note is a document a buyer sends a supplier when returning goods or claiming a deduction, recording that the amount owed should go down.
- Sales Return
A sales return is goods coming back from a customer after a sale, with the stock put back and the money refunded, adjusted in khata or exchanged.
- Invoice
An invoice is a document a seller issues to a buyer that lists the goods or services supplied, their prices and the amount due, usually with payment terms.
- Sales Tax Invoice
A sales tax invoice is the invoice a sales tax registered person must issue for a taxable supply, showing the details the Sales Tax Act, 1990 requires, including both parties' registration numbers and the tax charged.