What is a credit note?

An credit note it is a document that serves to demonstrate a refund. It is usually issued when after an invoice has been issued, there is an error in it, the products are incorrect or damaged or, a cancellation is given or a discount is applied on it, for which there will be a refund in the sale transaction.

Legally, thanks to the credit note on the one hand, you record in your company's accounting that the money has been returned to your client. In addition, on the other hand it is a document that must also be sent to the client along with a copy of the original invoice.

However, depending on the conditions of the purchase, it is not always necessary to return the amount to the customer, but a voucher or a discount can be made for future purchases.

When is a credit note issued?

Among the most common cases in which you can issue a credit note are the following:

  • With a customer dissatisfied with your service
  • When by mistake, the customer's bill was higher than it should have been.
  • You have issued an invoice by mistake.

You can download a credit note template to make any discount. More information on economic terms in the accounting glossary of Simple Economics.


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