Debit note a document issued by the salesman to the buyer or vice versa; prapared in order to reduce the amount of money that needs to be paid. It's created by the customer to inform the salesman that his account has been charged for the reasons specified therein. The debit note includes the date of return and the name of the seller to whom the goods were returned. All details of the returned goods and reasons for returning are mentioned, too. Each note is numbered. The debit note is usually printed in black. The debtor's account must be charged every time he has been sent a debit note.
Issuing debit notes
These corrections are made by means of debit notes and credit notesand require many procedures such as:
- In the case of a return, an amendment of the amount is required, customers may reduce the amount due to the seller.
- After purchasing the goods, the buyer credits the seller's account.
- If some parts of the goods are returned to the merchant, the value of the returned items is not to be paid and needs to be deducted from the amount.
- Technically, the merchant's account will be charged with the amount of goods returned to him. In this case, the buyer will send the debit note to the seller, which means that the salesman's account is debited with the amount of goods returned to him.
- After getting his goods back and receiving the debit note, every salesman is obliged to send a credit note to the customer, which means that the merchant has credited the buyer's account with the value of the goods returned to him.
- A debit note may also be given by the seller to the buyer if the amount of the facture is short or the price is calculated at lower rates.
- All in all, the seller will charge an amount exceeding the facture value from the buyer, so he will be obliged to send the debit note to the buyer.
- After that, the buyer will be able to send the credit note to the seller instead.
When is a debit note sent:
- When the goods are returned by the customer to the salesman.
- When returned defective, damaged or unsatisfactory goods.
- When an excessive charge was calculated in the facture.
The settlement and documentation of debit notes
The settlement of debit notes, either by issuing an invoice or proof of customer responsibility, depends on the actions of all other departments:
None of them is fully interested in taking time on these inquiries. It often happens that the credit manager is obliged to activate people who are beyond his control. That control can be divided into two parts:
The proper records of all debit notes need to be stored, probably in the credit department, in any order that is just useful – e.g. according to the customers or groups of products. Clients should be asked to send their notes to the appropriate person responsible for these files. International instructions should be given to ensure that all debit notes are forwarded to the credit department. It's often necessary to establish a separate section in the credit department for performing debit note control. For large accounts that have a fixed number of debit notes, it's a good idea to keep the record card (the history and status of each subject) A copy of each incoming debit note should be given to the appropriate person / department with a request for clarification. It must be continued. If the complaint is not accepted, it is necessary to send an explanation to the client (saving a copy for the credit department). Likewise, the issue of partial credit should also be covered by a letter.
- Siddiqui S.A. (2011). Comprehensive Accountancy XI, Laxmi Publications, p. 158
- Mcgraw-Hill T. (2009) Qb In Accountancy XI, 2E, Tata McGraw-Hill Education, p.14
- Thompson-Hosein F. (1988). Principles of Accounts, Heinemann, p.36
- Siddiqui S.A. (2011). Comprehensive Accountancy XI, Laxmi Publications, p. 156
- Tulsian P.C. and Tulsian S.D. (2003). Isc Commerce 2nd Edition, Ranta Sagar, p. 20.6
- Bass R.M.V. (1991). Credit Management: How to Manage Credit Effectively and Make a Real Contribution to Profits, Nelson Thornes, p.89-90
- Bass R.M.V. (1991) Credit Management: How to Manage Credit Effectively and Make a Real Contribution to Profits, Nelsom Thornes
- Mcgraw-Hill T. (2009) Qb In Accountancy XI Tata McGraw-Hill Education
- Thompson-Hosein F. (1988) Principles of Accounts Heinemann
- Siddiqui S.A. (2011) Comprehensive Accountancy XI Laxmi Publications
- Tulsian P.C. and Tulsian S.D. (2003) Isc Commerce 2nd Edition Ranta Sagar
Author: Katarzyna Maziarka