Difference Between Debit Note and Credit Note

 Difference Between Debit Note and Credit Note

Millions of purchase and sale transactions occur in day to day life, and so does the returns are made by many customers, when the find the products are not unto their requirement. Debit Note and Credit Note are used while the return of goods is made between two businesses. Debit Note is issued by the purchaser, at the time of returning the goods to the vendor, and the vendor issues a Credit Note to inform that he/she has received the returned goods.

When the goods are returned to the seller or supplier, a debit note is issued to him which indicates that his/her account has been debited with the respective amount. On the other hand, when a customer returns goods, a credit note is issued to him which shows that his account has been credited with the amount indicated in the note. Here in the given article we have discussed the substantial differences between debit note and credit note, take a read.

Difference Between Debit Note and Credit Note

BASIS FOR COMPARISON	DEBIT NOTE	CREDIT NOTE
Meaning	Debit Note is a document which reflects that a debit is made to the other party's account.	Credit Note is an instrument used to inform that the other party's account is credited in his books.
Use of	Blue Ink	Red Ink
Represents	Positive Amount	Negative Amount
Which book is updated on the basis of note?	Purchase Return Book	Sales Return Book
Effect	Minimization in account receivables.	Minimization in account payable.
Exchanged for	Credit Note	Debit Note

Definition of Debit Note

A commercial instrument made and issued by the purchaser and delivered to seller giving details regarding the amount debited from the seller’s account and the reasons for the same is known as Debit Note. The document provides information to the vendor that a debit has been made to his account in the buyer’s book.


The reasons for debiting the account are given as under:

When the buyer’s account is overcharged, he sends a debit note to seller.
When the buyer returns the goods purchased by him, then also he delivers the debit note.
When the buyer undercharges the seller’s account, then he issues debit note.
The seller issues a credit note to the buyer as an acknowledgment of the Debit Note. It is written in blue ink. In general, Debit note reduces the receivables.

Definition of Credit Note

A memo prepared and issued by one party to the other party, containing the details of the amount credited to the buyer’s account and the reasons for so, is known as Credit Note. It is issued in exchange for the Debit Note. It gives the information to the buyer; that is account is credited in the vendor’s book. The note is prepared with red ink.

The reasons for issuing a credit note is as under:

When the buyer overcharges the seller’s account, he issues the credit note.
When the supplier gets back the goods sold by him to the buyer, then also credit note is issued.
A buyer can also send credit note, in case the seller undercharges him.
The issue of credit note shows that the account payable are reduced. In general, it shows the negative amount.



The following are the differences between debit note and credit note:

A memo sent by one party to inform the other party that a debit has been made to the seller’s account, in buyer’s books, is known as Debit Note. A commercial document which is sent by one party to inform the other party that a credit has been made to buyer’s account, in seller’s books is known as Credit Note.

Debit Note is written in blue ink while Credit Note is prepared in red ink.
Debit Note is issued in exchange for Credit Note.
Debit Note represents a positive amount whereas Credit Note prepares negative amount.
Debit Note reduces receivables. On the other hand, Credit Note reduces payable.
On the basis of the Debit Note, purchase return book is updated. Conversely, sales return book is updated with the help of a Credit Note.

Conclusion

Normally, a debit note is issued when there is a return outward (purchase return) while in the case of return inward (sales return) credit note is issued. In a transaction, when the buyer returns the goods to the seller, the buyer will issue a debit note and the opposite party will issue a credit note in exchange for the debit note. Hence, they are the two aspects of the same transaction.

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1.  Technical Terminology Of Accounting

2.  Accounting Functions

3.  Accounting History

4.  Meaning Of Accounting

5.  Introduction Of Accounting

6.  Debit And Credit Rules

7.  Journal Entry

8.  Journal Entry Example

9.  What Is Tally?

10.     Creating A Ledger

11.     Company Info.

12.     Create Company

13.     Tally Ledger & Group List

14.     Startup Window Of Tally

15.     Features Of Tally

16.     Chart Of Accounts

17.     Accounting Vouchers

18.     Narration

19.     Voucher Entry

20.     Types Of Voucher

21.     Debit Note Vs Credit Note

22.     Maintain Bill-Wise Details

23.     Printing Bank Details In Sales Invoice

24.     Petty Cash Book

25.     Entries Under GST

26.     Currency

27.     Maintain Bill Wise Details

28.     Purchase Order Processing

29.     Multiple Price List Creation

30.     Maintain Account Only

31.     Manufacturing Account & BOM

32.     Ratio Analysis

33.     Split Company Data

34.     Profit And Loss Account Report

35.     Maintain Budget And Controls

36.     Mark Changed Vouchers

37.     Company Logos Printing

38.     Multi-Currency In Tally

39.     Interest Calculation

40.     Income And Expense Statement

41.     Payment Of Salaries

42.     Bank Transfer

43.     Payroll Voucher

44.     Payroll Info.

45.     Payroll Introduction

46.     Use Multiple Price Levels

47.     Create Cost Center

48.     Additional Cost Of Purchase

49.     Inventory Vouchers

50.     Tally Short Cut Key

51.     Short-Cut Function Keys