When to issue one
- You invoiced the wrong amount or quantity
- The buyer returned or rejected goods
- You agreed a discount after invoicing
- You are cancelling an invoice entirely (never just delete it)
What it must contain
- The word 'Credit note' and its own number (CN- sequence)
- The original invoice number and date
- Your and the buyer's details (same as the invoice)
- The credited lines with amounts and the reason
- The total credit amount
How it moves through the books
Seller records the credit note as a reduction of sales; buyer records it as a reduction of purchases (and input tax, if VAT was charged). The original invoice stays in place — gap-free sequences on both sides.
Credit note vs refund
A credit note is paper (an accounting correction); a refund is money moving back. In practice the refund is often the payment, and the credit note is the document that justifies and records it against the original invoice.
Frequently Asked Questions
Can a credit note be partial?
Yes — credit only the affected lines or quantities. The credit note total is what gets subtracted from the outstanding invoice.
What if the buyer already paid?
Issue the credit note anyway and either refund the money or hold the credit against future invoices — state which in the notes.
Do credit notes expire?
No, but issue them in the same accounting period as the correction where possible — some tax authorities restrict back-dated credits across periods.