WHAT IS DEBIT NOTE..?

A debit note, also known as a debit memorandum or debit memo or purchase return, is a document used in accounting to indicate that an amount has been added to a customer’s account as a result of a mistake or an adjustment.

WHO ISSUE DEBIT NOTE?

A debit note is typically issued by the seller or service provider, also known as the creditor, to the customer, also known as the debtor. The creditor is the party responsible for issuing the debit note, which is used to adjust the customer’s account. The debit note is usually sent to the customer along with an invoice or statement and serves as a record of the adjustment. The debit note is also used to inform the customer of the adjustment and the reason for it, such as a mistake or an adjustment for returns or allowances.

Debit notes are used for a variety of purposes, including:

• Recording adjustments to customer accounts: Debit notes are used to record adjustments to customer accounts when errors are discovered, such as overcharging or undercharging for goods or services.

• Recording returns and allowances: Debit notes are used to record returns of goods or allowances for damaged goods.

• Recording discounts: Debit notes are used to record discounts given to customers, such as volume discounts or early payment discounts.

• Recording bad debts: Debit notes are used to record bad debts, which are amounts that a customer owes but is unable to pay.

• Recording corrections to invoices: Debit notes are used to record corrections to invoices, such as changes in the price or quantity of goods or services.

• Recording other account adjustments: Debit notes are used to record other adjustments to customer accounts, such as freight charges or taxes.

• Record of credit note issued: Debit note also can be used to record the credit note issued to customer.

DEBIT NOTE CONTAINS:

A debit note typically contains the following information:

• Date: The date the debit note is issued.

• GST Number: GST NUMBER of the supplier and customer.

• Reference number: A unique number assigned to the debit note, which can be used to match it with the original invoice or statement.

• Customer information: The name and address of the customer.

• Description of the adjustment: A description of the adjustment being made, such as a return of goods or a correction to an invoice.

• Amount of the adjustment: The dollar amount of the adjustment being made to the customer’s account.

• Reason for the adjustment: The reason for the adjustment, such as a mistake or an adjustment for returns or allowances.

• Signature of the issuer: The signature of the person issuing the debit note, usually an authorized person from the creditor’s company.

• Terms and conditions: Any specific terms and conditions regarding the debit note.

• Credit note reference: If debit note is issued in reference of credit note then credit note reference also can be included in debit note.

• Other relevant information: Any other relevant information that may be necessary to support the adjustment, such as the original invoice number or the purchase order number.

EXAMPLE – ACCOUNTING ENTRY FOR DEBIT NOTE:

The accounting entry for a debit note would be a debit to the accounts payable account and a credit to the purchase returns and allowances account. This would reduce the amount of accounts payable and increase the amount of purchase returns and allowances.

For example, if a company receives a debit note for $100, the accounting entry would be:

Debit: Accounts Payable $100

Credit: Purchase Returns and Allowances $100

This would decrease the amount of accounts payable by $100, and increase the amount of purchase returns and allowances by $100.