Difference Between Debit Note vs Credit Note
A debit note and credit note is issued when the goods are returned by a customer to the supplier or seller of those goods. A debit note is issued to the supplier or the seller of the goods while a credit note is issued to the customer or the buyer of the goods. When the supplier or the seller receives a return of the goods then he or she receives a debit note stressing upon the fact that his or her account is debited with a respective amount whereas when the customer or the buyer return goods, then he or she receives a credit note that stresses upon the fact that his or her account is credited with an amount that is mentioned in the note. A debit note reflects a positive amount whereas a credit note reflects a negative amount. A debit note lowers account receivables whereas a credit note lowers account payables. A debit note is exchanged for a credit note whereas a credit note is exchanged for a debit note. When a customer is overcharged for a good, then he or she issues a debit note to the supplier whereas when a supplier or the seller is overcharged by a customer, then the former issues a credit note to the latter.
Head to Head Comparison between Debit Note vs Credit Note (Infographics)
Below are the top 13 differences between Debit Note vs Credit Note
Key Differences between Debit Note vs Credit Note
Let us discuss some of the major key differences between Debit Note vs Credit Note
- The journal entries passed in the case of a debit note are-
Sales Return Account – Dr.
To Debtors’ Account – Cr.
- On the other hand, the journal entries passed in the case of a credit note are-
Creditors’ Account – Dr.
To Goods Returned Account – Cr.
- The debit note reflects a positive amount whereas the credit note reflects a negative amount.
- Debit notes are issued when the buyer or the customer returns the products to the supplier or the seller of the same. On the other hand, a credit note is issued when the supplier or the seller of the goods receives the returned products from the customer or the buyer.
- Debit notes are issued in the exchange of credit notes. On the other hand, credit notes are issued in exchange of debit notes.
- The debit note can lower the account receivables whereas the credit note can lower the account payables.
- Purchase return books are updated in the case of a debit note whereas sales return books are updated in the case of a credit note.
- A debit note is issued by the customer or buyer of the goods to the supplier or the seller of the goods whereas a credit note is issued by the supplier or the seller of the goods to the customer or buyer of the goods.
- Debit note is another form of purchase return of products whereas credit note is another form of sales return of products.
- A debit note can only be issued in the event of credit purchases whereas a credit note can only be issued in the event of credit sales.
Debit Note vs Credit Note Comparison Table
Let’s discuss the top comparison between Debit Note vs Credit Note:
| Basis of Comparison | Debit Note | Credit Note |
| Meaning | A debit note is issued to the supplier or the seller of the goods by the customer or the buyer of the same for returning the goods received by the latter due to the defects or discrepancies present in the same. A debit note is also updated with the reasons behind the return of goods. | A credit note is a type of sales return that is issued to the buyer or the customer of the goods by the seller or the supplier of the same and it informs that the purchase returns are accepted. |
| Issued by | A debit note is issued by the customer or the buyer of the goods. | A credit note is issued by the supplier or seller or the sales team responsible for the selling of the goods. |
| Colour of ink Used | The color of ink used in a debit note is blue. | The color of ink used in a credit note is red. |
| Reflects | It reflects only a positive amount. | It reflects only a negative amount. |
| Possible Effects | Debit notes reduce account receivables. | Credit notes reduce account payables. |
| Exchanged Against | Debit notes are issued in exchange for credit notes. | Credit notes are issued in exchange for debit notes. |
| Books Updated | Purchase return book is updated. | Sales return book is updated. |
| Buyer to Seller | Debit notes are issued when the goods are returned by a customer or buyer to the supplier or the seller. | Credit notes are issued when the seller or the supplier undercharges or has delivered additional goods. |
| Seller to Buyer | Debit notes are issued when the buyer or the customer is undercharged or when the seller or the supplier has sent additional items. | Credit notes are issued when the buyer or customer acknowledges the debit note. |
| Another Form | Debit note is another form of purchase return of goods. | A credit note is another form of sales return of goods. |
| Entry | Supplier or the seller accounts are debited while the purchase return accounts are credited in the customer’s account. | Sales return accounts are debited while the buyers’ or the customers’ accounts are credited in the seller’s account. |
| Results | Purchase accounts are reduced. | Sales accounts are reduced. |
| Issued to | A debit note is issued to the seller or the supplier of the goods. | A credit note is issued to the buyer or the customer of the goods. |
Conclusion
A debit note is generally issued in the event of purchase returns (return outward) whereas a credit note is issued in the event of sales return (return inward). When the goods are returned back to the supplier, then the customer issues a debit note and the former shall issue the latter a credit note. A debit note is made in blue ink whereas a credit note is made in red ink. A debit note reflects a positive amount whereas a credit note always reflects a negative amount. Debit note impacts account receivables and cause the same to lower down whereas a credit note impacts account payables and cause the same to lower down.
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