DEBIT NOTE: MEANING, REASONS, COMPONENTS AND FUNCTIONS

Post a Comment

A debit note is a commercial document used for undercharge correction.

It may be issued if it becomes essential to raise the amount owed from a debtor, for whatever reason.

In most cases, the buyer issues a debit note to the seller when he returns goods purchased on credit.

However, the seller may occasionally send a debit note to clarify the buyer's debt obligation

A debit note, sometimes known as a debit memo, can occasionally be used to address the problem of the incorrect invoice.

When is a debit note issued?

Debit notes may be issued due to the following reasons:

1. When the buyer receives goods that are not what he ordered, either in terms of quality or standard. 

As a result, the buyer decides to return the goods.

2. Undercharge errors in the invoice issued by the seller.

For example, expenses that should have been charged to a customer, but were omitted by mistake when the invoice was made.

The debit note will be prepared in this instance to correct the mistake.

3. If the seller needs to increase the amount that the debtor owes them for any reason.

A good example is when the seller increases the billing amount for goods 

4. The seller no longer wants to buy the goods that have already been ordered.

What information is found in the debit note?

1. The issuing company name

2. Date of issue.

3. The issuing company's address

4. The number of goods debited and the justification for the debit.

5. Price of goods per unit.

6. Name and other relevant information about the buyer.

Functions of the debit note 

1. It is used to correct the under-charge in the invoice: When it is issued by the seller, the debit note serves as the document for correcting undercharges made in the invoice and tells the buyer that his debt has risen by the same.

When it is issued by the buyer, the debit note serves as the document for correcting the overcharge made in the invoice and tells the seller that his credit has been reduced by the same.

2. Serves as the source document for purchase return: Whenever goods are returned on credit, buyers also issue debit notes.

A debit note does, indeed, serve as evidence of returned purchases.

As a result, the debit note serves as the source document for purchases returns journal or return outward journal.

If you have questions relating to this post? Feel free to ask me in the comment box.

Alternatively, you can also our Telegram community.

Help us grow our readership by sharing this post

Related Posts

Post a Comment

Subscribe Our Newsletter