Credit Notes

Learn how to create and manage credit notes for returns, adjustments, and refunds.

Overview

A Credit Note is used to reduce the amount a customer owes.

It is created when:

Goods are returned
Items are damaged
Pricing errors need correction

When to Use a Credit Note?

Create a credit note when:

Customer returns items
You need to issue a refund
Invoice amount needs adjustment

How Credit Note Works

A credit note is created against a Sales Invoice.

It:

Reduces outstanding amount
Adjusts customer balance
Updates financial records

Create a Credit Note

Method 1: From Sales Invoice (Recommended)

Open the Sales Invoice
Click Create → Return / Credit Note
System auto-fetches:

Customer
Items
Quantity
Pricing

Method 2: Manual Creation

Go to Sales → Sales Invoice
Click Add New
Enable Is Return
Link original invoice

Enter Return Details

For each item:

Enter return quantity
Adjust rate if needed

System will calculate:

Negative amount (credit value)

Submit Credit Note

Click Save
Click Submit

Impact of Credit Note

Reduces customer outstanding balance
Updates sales records
Adjusts inventory (if stock return enabled)

Refund Handling

After creating credit note, you can:

Adjust against future invoices
Issue refund via Payment Entry

Inventory Impact

If items are returned:

Stock is added back to warehouse
Inventory levels are updated

Partial Returns

You can return part of the order.

Example:

Sold: 10 units
Returned: 2 units

System adjusts only returned quantity.

Best Practices

Always link credit note to original invoice
Verify return quantity
Check pricing and taxes
Record reason for return

Common Issues

Wrong credit amount → Check quantity and rate
Stock not updated → Verify return setting
Outstanding not reduced → Check invoice link

Example

Invoice: INV-001

Item: Cheese Makhana

Sold: 10 cartons

Returned: 2 cartons

👉 Credit note created for 2 cartons

What Next?

Record refund → Payment Entry
Manage invoices → Sales Invoice
Track returns → Reports

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