Understanding Debit & Credit Note With Few Examples

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This Article contains Detailed Information about Debit Note & Credit Note

Debit note is a note sent by one party to another informing him that his account is debited in the sender's book.

e.g. P (Purchaser) Purchased goods from S (Seller)

Books of P	Books Of S
Purchase A/c Dr.  To S A/c (Being goods purchased)	P A/c Dr. To Sale A/c (Being goods sold)

P --------> sends a debit note to S (for receiving damaged material)

Books Of P	Books Of S
S A/c Dr. To purchase return A/c (being goods returned)	Sales return A/c Dr. To P A/c (being goods returned)

When the P returns the goods to the S.  P sends a Debit Note to the S (ie. the P debits the S in his books ie. P's Books) and the S sends a Credit Note to the P (ie. the s credits the P in his Books ie. S's Books).

Credit note is a note sent by one party to another informing him that his account is credited in the sender's book.

When Debit Note is sent?

1. Debit note can be sent by buyer when he is overcharged.
2. It can be sent by buyer when he returns back the goods.
3. It can be sent by the seller when he has undercharged the buyer.

When Credit Note is sent?

1. Credit note can be sent by the seller when he has overcharged the buyer.
2. It can be sent by the seller when he receives back the goods.
3. It can be sent by buyer when he has been undercharged.

Another Example:-

Debit Note - When x issues debit note to y, y has to pay money to x. In the books of x, y is debited.
Example: x sells Goods worth Rs 100 to y. But later x realises that he has charged Rs 15 less by mistake. So x issues a debit note to y. y has to pay Rs 115.

Credit Note - When x issues credit note to y, y has to get money from x. In the books of x, y is credited.
Example: x sells Goods worth Rs 100 to y. But later x agrees to a discount of Rs 15 . So x issues a credit note to y. y has to pay Rs 85.

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