what is a debit note and credit note?
Debit Note
This is referred to a note that is issued by the business to the other concerned parties. It represents the details and reasons for debiting the concerned party's account.
Example: Goods worth Rs 2,000 returned by the business to Mr. Ramesh (a supplier).
In this case, Ramesh's Account will be debited with Rs 2,000 as the goods purchased from him were returned to him. A issue of Debit Note in this case explains that Ramesh A/c has been debited with Rs 2,000 with explanation, i.e. due to the goods returned by the business.
Credit Note
Similar to the Debit Note, a Credit Note is also issued by the business to the other concerned parties. It represents the details and reasons for crediting the concerned party's account.
Example: Goods worth Rs 2,000 were returned by Mr. Ramesh (a customer) to the business.
In this case, Ramesh's Account will be credited with Rs 2,000 as the goods sold to him were returned back to the business. A issue of Credit Note in this case explains that Ramesh's A/c has been credited with Rs 2,000 with explanation, i.e. due to the goods returned by him.
Both Debit Note as well as Credit Note also contains other important information such as, quantity of the goods (in units), amount of the transaction, Challan Number, Date, Names and Addresses of both the parties involved in the transaction.