Business owners might get confused about the difference between debit note and credit note. However, these two play contrasting roles. Debit note and credit note might appear to be fancy terms, but they help in the smooth finances of a business. Delve to know about debit note vs credit note.

Maintaining accurate financial records is very important in business transactions. The debit and credit notes are two crucial tools facilitating accuracy. 

What is a Credit Note?

A credit note is a document of agreement or acceptance from seller to buyer. It refers to accepting an error in the buyer’s invoice from which a customer might be unsatisfied. So, the seller shares a credit note as an apology either by giving soft credit or reimbursement.

What is a Debit Note?

A debit note is a legal document for a return to the seller from the buyer. It is also known as a debit memo. A customer usually sends this message when there is an error or a problem with the items they have purchased. The debit memo needs to meet the expectations of a buyer. Also, the record of the buyer shows that they have demanded a refund.

Debit Note Vs Credit Note

1. What?

• A debit note says you owe money to someone.
• A credit note says someone owes you money.

2. Who?

• Buyers usually use a debit note.
• Credit notes are used by the sellers.

3. Example

• You get a debit note when you return something you bought.
• A seller gives you a credit note when they get back something they sold.

4. When?

• When you buy something on credit, you will need a debit note.
• When you are a seller and buyer returns the items they bought, you use a credit note.

5. Marking

• A debit note has blue ink on it.
• A credit note often uses red ink.

6. What is tells?

• Debit notes tell that you have paid the money or owe less.
• Credit notes tell that someone owes you money or pays you back.

7. Where it goes?

• “Purchase Return Book” contains debit notes.
• “Sales Return Book” contains credit notes.

8. Work

• A debit note reduces the money someone owes.
• A credit note reduces the money someone owes you.

9. Entry

• Debit notes are like writing in the account that you paid someone back.
• Credit notes are like writing down that you got something back or someone paid you.

Uses of Credit Note Vs Debit Note

After looking at the difference between debit note and credit note, now we will see when we should reach a credit note vs debit note.

Use of Debit Note in GST

The following are the uses of a debit note in GST:

• Increases taxable amount: Debit note in GST grows the ante on the amount of supply.
• Increases GST levied on the invoice: When the GST charged on an invoice needs a boost, we can use a debit note in GST to rescue. However, these can be complicated processes, you can choose a GST billing software like EazyBills to ease out the task.

Use of Credit Note in GST

Both debit note and credit note in GST are useful. The following are the uses of credit note in GST:

• Inadequate supplies or return: If the recipient does not find goods up to the mark, a GST credit note comes into action.
• Reduces taxable amount: Credit note in GST helps you when you aim to scale back the taxable amount of supply.
• Reduces GST in amount charged: GST Credit note has your back when you need to dial down the value charged or GST rate on an invoice.

Reasons For Issuing Credit Note Vs Debit Note

Several reasons can prompt the business owners to issue a debit note or a credit note:

• Sometimes a seller may unintentionally undercharge the buyer. Here, the seller will send a debit note to the buyer requesting the difference of payment. On the contrary, a seller may overcharge the buyer and will issue a credit note to rectify his error.
• If the buyer returns purchased items to the seller, a seller will issue a credit note to reflect the reduced amount owned by the seller.
• When a seller offers an additional discount after sending an invoice to the buyer, they will use a credit note to document this.

Information To Be on Debit Note Vs Credit Note

Here is a list of the information that must be on the credit note vs debit note:

• Label the debit note or credit note as a “supplementary invoice” or “updated invoice.”
• Include the name and GSTIN of the seller on a debit note and of the buyer on the credit note.
• Make use of a unique serial number with a striking mix of numbers, alphabets, and special characters.
• Always add the date of issue on both debit and credit notes.
• Add recipient information such as their name, GSTIN, address, etc. For unregistered recipients, use extra details like zip codes and delivery addresses.
• Add tax invoice details including date, serial number, tax rate, taxable value, and tax debit/credit recipient details. These are essential details on a debit note or a credit note.
• Seal it with the signature of an authorized representative or supplier. You can also use digital signatures on credit or debit notes.

Make Accounting Easy with EazyBills

After knowing about the difference between debit note and credit note, now let’s see what’s an easy way to make them. EazyBills is a super smart billing software that helps you with your finances. Handling a debit note or a credit note becomes a piece of cake with EazyBills software.

Conclusion

Here we wrap up the discussion about the difference between a debit and a credit note. Both work as an important document between buyers and sellers but their purposes are quite different. Some key takeaways are as follows:

• A debit note functions like a receipt and is useful when returning an item or making payments to others.
• A credit note is a seller’s way of taking back the items not needed by the buyer. The seller may offer soft credit or reimbursement.