1. How to make a Credit Note

The user has the option to generate a Credit Note either referencing a specific Sales Invoice or directly from the Sales Invoice itself. It’s important to note that to create a Credit Note, the corresponding invoice must have been paid using a Payment Entry.

Here’s how to proceed:

1. Navigate to the relevant Sales Invoice and select “Create” followed by “Return / Credit Note.”
2. The Customer and Item details will automatically populate based on the information provided in the Sales Invoice.
3. If the Customer made partial or full payment, ensure a Payment Entry has been recorded against the original Sales Invoice.
4. Save and Submit the Credit Note.

The quantities of the returned items and payment amounts will be represented as negative values since it reflects a return transaction.

1.1 How does Credit Note affect ledger

After a Payment Entry is generated against the original Sales Invoice, the corresponding amount will be recorded in the Customer’s account as a negative balance. This adjustment ensures that the amount is deducted from their account, and it will be offset against future purchases made by the Customer.

Here’s how the ledger is impacted following a payment entry against a returned invoice:

Refer the Sales Invoice page for any other details.

1.2 No payment was made against Sales Invoice

If no payment was made against the original invoice, you can simply cancel the Sales Invoice. However, if only a portion of the items, such as 5 out of 10, are being returned from an invoice, generating a Credit Note is beneficial for updating the ledger.

2. Example

Customer Rohan purchased PVC pipes worth Rs 300 plus taxes. Upon delivery, Rohan discovered that the products were damaged. As a result, he returned the products, and a Credit Note will be issued.

3. Related Topics

1. Payment Entry
2. Debit Note