What is a debit note & credit note

Very Simple – Read this story

Ram went to Shoppers Stop for shopping and buys a Shirt for Rs. 5000. His wife did not like it, so he went back to return it. Shoppers Stop did not return the shirt for money but instead issued a Credit Note of Rs. 5000 which could be exchanged for any other product at Shoppers Stop in future.

NOTE – 1:  Shoppers Stop Issued Credit Note to you-

IT IS AN ASSET FOR YOU AND A LIABILITY FOR SHOPPERS STOP

If you remember the above, just reverse one Terminology in the above statement and situation will reverse:

NOTE – 2: You Issue credit Note to Shoppers Stop – [we changed just one thing – Compared to Note – 1]

ASSET FOR SHOPPERS STOP & LIABILITY FOR YOU

Note – 3: Shoppers Stop issues a DEBIT Note to you – [we changed just one thing Compared to Note  -1]

ASSET FOR SHOPPERS STOP & LIABILITY FOR YOU

Note – 4: You Issue DEBIT Note to Shoppers Stop – [we changed just one thing Compared to note-2]

IT IS AN ASSET FOR YOU AND A LIABILITY FOR SHOPPERS STOP

Do not memorize all of the above, just remember the story and 1st example – derive the rest wherever necessary.

Conclusion – 2 dimensions needs to be identified:
1. Who is the issuer – You or Shoppers Stop
2. What is being issued – Debit note or credit note

CA Ankit Agarwal
Blogger (www.precisezone.com/wp/)
Kolkata/Siliguri/Jaigoan