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DEBIT & CREDIT NOTES

M.Sriram Shenoy (CA Final) (814 Points)

20 June 2008

Can you people please explain me the concept of debit and credit notes in a company's operation. Also its effects on debtors & creditors accounts? Please give a detailed descripttion. I am patient enough to read.

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3 Replies

ram rahim (Article Assistant) (188 Points)
Replied 20 June 2008

a debit note is issued by a buyer to the seller, when he returns the goods that he may have purchased. The impact is, that he credit purchases account and debits the creditor account in his books. And expects the creditor to make the corresponding entries in his books.

A credit note is issued by a seller to a customer, when the customer returns the goods purchased. It is a intimation that the customer's account has been credited and as a result his liability has reduced.

CA Naveen Kumar Agrawal (Chartered Accountant / MBA) (939 Points)
Replied 21 June 2008

nikhil u replied well but debit & credit notes are not issued only for the purpose (as explained by u). these may be issued for various other reasons also (e.g. quality & quantity discount, difference in calculation of invoice amount etc.). and both debit & Credit notes can be issued by either parties.

Accounting : in the books of issuer of debit nots

concerned party (to whom debit note is issued)'s a/c Dr.

To P/R or quality & quantity disc. etc.

Accounting : in the books of receipent of Debit Note:

S/R or quality & qty. disc. etc.. a/c Dr.

To concerned party (from whom the Dr. Note is received)'s a/c.

similaly in the case of credit note (but opposite).

these are the single(consolidated) entry. it may also be done in two different entries alternatively.

accountin in the books of receipnt of Dr. Note

1. Dt. Note A/c Dr.

To Party

2. Reason (what ever) a/c Dr.