It is a document issued by a vendor to a customer to reduce the due amount in the event of any return of goods or error in the invoice. It is created for a partial amount or for the full amount of the invoice.
Amount due for customer = Amount on invoice - Value of credit note
Let’s say you sell 100 pens each of Rs. 10 to a customer called John. Out of the 100, he finds that 10 of them don’t have ink. You decide to issue a refund to John. In such a case, you can issue a Credit Note for the 10 pens that you are returning to John. The total value of the Credit Note will be Rs. (10*10) i.e. Rs 100.
Amount due for John = Rs. 1,000 (100* 10) - Rs. 100 (10*10) = Rs. 900
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