Credit Note

A Credit Note is a document sent by a seller to the Customer, notifying that a credit has been made to their account against the goods returned by the buyer.

A Credit Note is issued for the value of goods returned by the Customer, it may be less than or equal to the total amount of the order.

How to make a Credit Note

The user can make a Credit Note against the Sales Invoice or they can directly make Credit Note from the Sales Invoice without reference. Note that to create a Credit Note, the invoice must be paid using a Payment Entry.

Go to the respective Sales Invoice and click on Create > Return / Credit Note. Credit Note from Invoice
The Customer and Item details will be fetched as set in the Sales Invoice.
If the Customer had paid partially or fully, make a Payment Entry against the original Sales Invoice.
Save and Submit. Credit Note

The Item quantity and Payment amount will be negative since it's a return.

How does Credit Note affect ledger

Once a Payment Entry is created against the original Sales Invoice, the amount will be added to the Customer's account in negative so that the next time they make a purchase, this amount will be adjusted.

This is how the ledger is affected after a payment entry against a returned invoice:

Refer the Sales Invoice page for any other details.

Credit Note adjustment against a new Sales Invoice

If a customer returns goods after paying the original Sales Invoice, BITEX creates a Credit Note for the returned amount. Instead of refunding the full amount immediately, you can adjust part of that credit against a new Sales Invoice and refund only the remaining balance.

For example, a customer paid Rs. 400 for an item and returned goods worth Rs. 200. Later, the customer buys another item worth Rs. 100. You can adjust Rs. 100 from the Credit Note against the new Sales Invoice and refund the remaining Rs. 100.

Steps

Create the original Sales Invoice and submit the Payment Entry against it.
From the original Sales Invoice, create a Return / Credit Note for the returned quantity.
Create and submit the new Sales Invoice for the replacement or new purchase. This invoice will remain unpaid until it is adjusted.
Create a Journal Entry to adjust the Credit Note against the new Sales Invoice.

Journal Entry example

Assume the Credit Note amount is Rs. 200, the new Sales Invoice amount is Rs. 100, and the remaining Rs. 100 must be refunded to the customer.

Debit Debtors for Rs. 200 and link it to the original returned Sales Invoice / Credit Note.
Credit Debtors for Rs. 100 and link it to the new Sales Invoice.
Credit Cash or Bank for Rs. 100 to record the refund.

While entering the Journal Entry, add the Reference Type as Sales Invoice and select the correct Reference Name for both the Credit Note and the new Sales Invoice. Linking the references is important because it reconciles the invoices and updates their outstanding amounts.

After the Journal Entry is submitted, the new Sales Invoice is marked as paid and the customer ledger should show the adjusted balance. If the Credit Note is fully adjusted, the customer balance becomes zero for this transaction.

No payment was made against Sales Invoice

In case no payment was made against the original invoice, you could just cancel the Sales Invoice. But, if only 5 out of 10 Items are being returned from an invoice, creating a Credit Note is useful for updating the ledger.

Example

Customer Rohan had purchased PVC pipes worth Rs 300 + taxes and at the time of delivery, Customer found that the products were damaged. Now Rohan has returned the product a Credit Note will be issued.

Credit Note with payment entry in BITEX for above example is as below:

Payment Entry
Debit Note
Sales Return