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Updated on 3/14/2019
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Accounting Credit Transactions
Direct link to topic in this publication:

Credit Note : Saved

A Credit Note is just opposite to a Sales Invoice, hence accounting impact also will be reversal.

Stock dr xxx

Sales return dr xxx

To Cost of Goods Sold xxx

A/c Receivable xxx

Accounting entry interpretation

Debit

Stock: Purchase value (cost) of sold goods, because it comes back to the premises, this will be debited

Sales return: Shows the sales value of amount returned, later this value will be deducted from the sales to find net sales amount.

Credit

Cost of Goods Sold: Cost ( Purchase value) of the goods moved out form the premises.

A/c Receivable : This amount indicates the deduction in net amount from debtors. It is the amount to be returned to Customers. 

(If tax is charged for the sales, A/c receivable will show an amount inclusive of tax and same amount will be debited as Tax on Sales.)

An excess of A/c Receivable debited in Sales Invoice over corresponding A/c Receivable credited in a Credit Note shows the profit in transaction. If inverse, it shows the loss in transaction.

Credit Note : Cash Paid

When cash is paid against a Credit Note, following accounting entry is made under Receipt Journal.

Apply/Refund Credit Note dr xxx

To Payment by cash xxx

Accounting entry interpretation

Debit

Payment on Invoice: Refers the transaction on which payment has been made to the Customer, It shows the expense incured by the company.

Credit

Payment by Cash : Indicates the mode by which company has paid the amount to Customer.


Credit Note : Partial amount refunded

When partial amount is refunded, the same is shown under history tab of Credit Note transaction. Amount refunded will be shown under Receipt Journal.