what is credit note? what are the advantages and disadvantages of credit note?
Answers
Answer:
A credit note is issued to reduce the amount of money in the invoice. It is issued when a customer returns goods that had already been invoiced, it can be issued to capture a discount that was previously omitted or just to correct an overstated invoice.
Explanation:
What is a credit note and what are its advantages and disadvantages?
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Credit Note is a note sent by a Seller to its Buyer informing her that your account with us is being 'credited' with the amount mentioned and for the reasons mentioned. Correspondingly, Buyer will send a 'Debit Note' to Seller informing the 'debiting' of Seller's account with the Buyer.
Consider the following treatment in A/c language:
You are a Seller and I am the person Buying from you. Technically, I will be your Debtor/customer and will be liable to pay you. Therefore, my account in your books will show a Debit balance.
Now, you want to credit my account due to Sales Return or wrong billing etc. This means you want to reduce my account balance. Reduction of Debit can only be done by Credit and vice versa. So you will raise a 'Credit' note on me, telling me that you are 'crediting' my account.
Reverse will apply for Debit Note.
It is just an information document for recording purposes, so that you become safe in case any dispute arises due to balance differences. It is a protection. Even a simple email with the required information can be construed as a Debit/Credit Note if meant so.
Hope this helps :-)
Answer:
A credit note is issued to reduce the amount of money in the invoice. It is issued when a customer returns goods that had already been invoiced, it can be issued to capture a discount that was previously omitted or just to correct an overstated invoice.
Advantages :
Credit notes are legal documents, just like invoices, that give you the important ability to cancel out an already issued invoice, either in full or in part. Issuing a credit note essentially allows you to delete the amount of the invoice from your financial records, without actually deleting the invoice itself.
Disadvantages :
Encouraging impulsive and unnecessary “wanted” purchases. High-interest rates if not paid in full by the due date. Annual fees for some credit cards – can become expensive over the years. Fee charged for late payments.