Credit note

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It has been suggested that this article or section be merged with Credit Memo. (Discuss)

A credit note is a monetary instrument issued by a seller that allows a buyer to purchase an item or service from that seller on a future date; I.e A gift card or store card credit. Credit notes may be issued by a seller as a goodwill gesture to a buyer who wishes to return previously purchased merchandise (instead of cash repayment) in circumstances where the original sales agreement did not include an explicit refund policy for returned items. In such circumstances, a credit note of value equal to the price of the returned item is usually issued allowing the buyer to exchange his purchase for other items available with the sale.

A Credit Note or Credit Memo can also be used to adjust or rectify errors made in a sales invoice which has already been processed and sent to a customer. If you have already sent an invoice to a customer but now need to provide a credit for that invoice, you would send them a Credit Note or Credit Memo. You can think of a credit note as a "negative invoice."

A Credit Note can also be raised for returned goods. After the sale, if the customer is not happy with the goods for various reasons like damage, expired he would return the goods. This transaction has to be reversed for accounting purposes and a special type called credit note can be used.