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why debit notes and credit notes are passed?
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Answer Posted / daniel
A credit note is raised when an invoice has been over
charged or when goods sold are returned say due to damage or
when not in accordance to the buyers specification hence it
is issued by the seller to the buyer.
How recorded: Assuming you make all your sale on credit
Example you sell goods worth 10,000 and the buyer returns
goods worth 2,000
First entry DR A/C Receivable 10,000
CR Sales 10,000
second entry when good are returned
Dr Goods returned 2,000
Cr A/C Receivable 2,000
On the other hand a Debit note is raised when a buyer is not
satisfied by good delivered by a seller or due to damage of
good say when in transit.
How recorded assuming you buy goods on credit
Example you buy goods worth 10,000 and return goods worth 2,000
First entry
Dr Purchases 10,000
Cr A/C Payable 10,000
Entry after goods are returned
Dr A/c Payable 2,000
Cr Goods Returned 2,000
NOTE: From the sellers perspective a debit note from the
buyer is a credit note to the seller in his/her accounts and
the vice verse.
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