B1: 2.06 Credit notes

A Credit Note is a document prepared and issued by a business to a customer and records a reduction in the amount previously charged to the customer on its invoices. Credit notes can be required for a variety of reasons:

  • After an invoice was issued, some of the goods were returned by the customer
  • An invoice is issued but some or all of the goods charged for were not received by the customer
  • An invoice was issued but the goods charged for turned out to be of a lower quality than were ordered but the customer accepted them anyway on the condition that a price reduction was made
  • An invoice was issued that failed to take into account a discount that the customer was entitled to

A credit note is therefore the opposite of an invoice and therefore records similar information to an invoice including:

  • Name and contact details of both supplier and customer (including the customer reference number)
  • The supplier’s VAT registration number
  • The date of the credit note
  • A unique credit note number
  • The associated returns note number and invoice number should also be included
  • Details of the reason why the credit note has been issued should be included
    • For example, the credit note might specify the goods that have been returned together with the amounts that are being credited
Example of a Credit Note

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