What is a Debit Note?
A debit note is a document a seller sends to a buyer to inform them of an increase in the amount payable due to a discrepancy in the original invoice. This note serves as a legal transaction record and is used to adjust the buyer's accounts payable balance.
The debit note may include information about an open invoice, a reminder of due money, the full anticipated credit, a list of returned products, and the reason for their return. Unlike invoices, debit notes don't require immediate payment.
When is a Debit Note Used?
A debit note is used when there's a change in the original invoice due to an overcharge, an undercharge, damage to goods during transit, or when goods are returned due to defects or other issues.
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How does Debit Note Work?
A debit note is a confirmation document sent by a buyer while returning goods or services to a seller. It's sent when goods have defects or when the buyer is overcharged. It includes specific information such as the buyer's name and address, the date of the original invoice, the reason for the debit note, and the new total amount owed.
Debit notes allow a seller to ask for a reduction in the amount due for already-shipped items. They can also request a price reduction on a specific product or adjust the number of items agreed upon.
Components of a Debit Note
- Header description stating the document is a debit note
- Name, address, contact details and GSTIN of the recipient
- Name, address, contact details and GSTIN of the supplier, serial number of the debit note
- Invoice reference number against which debit note is issued
- Information on the number of products debited
- The class of items debited
- Purchasing cost per unit
- The total amount deducted for products
- Date the debit note was created
- Verification of the document in the form of a signature
The benefits of debit notes
- The supplier keeps a record of all returned products with a debit note.
- The supplier can match the credit note with the copied debit note.
- Regularly reviewing the debit notebook ensures that all returned items have been accounted for.
- The signature on the consignment note proves that the products were returned.
- The supplier keeps the original debit note, which serves as a record for issuing a credit note.
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