Credit Notes

How do I issue a credit note?

At various times you may want to issue a credit note against a customer’s account. This maybe to make an adjustment to their balance or simply to record a credit that you have offered. This support note shows you how.

How you handle credit notes depends on a variety of factors, such as:

  • Is the credit for the entire sale?
  • Is the credit for a partial sale?
  • Have any payments already been received?
  • Does the customer want a refund cheque or a credit on their account?

In what type of situations would I need to issue a credit note?

Items returned because they were faulty
  • If all items were returned and they had not been paid for, just reverse the sale and use the Returns & Credits tab of the Sales Register to apply it to the original invoice.
  • If only some of the items were returned, create an Item Invoice credit just for the returned goods and use the Returns & Credits tab of the Sales Register to apply the credit to the original invoice.

How do I create a credit note?

To create a credit note you can chose to reverse an existing sale which in turn will create a negative sale or simply create a negative sale from scratch. Here we will examine the first method.

Go to the Setup menu, choose Preferences and click the Security tab.
Security Preferences

Security Preferences

This method can be used where an entire sale is to be reversed. This will create a credit note the the whole value of the sale and return all stock items into inventory.

  1. Locate the original transaction in the Sales tab of the Transaction Journal or the Sales Register.
  2. Click the white zoom arrow next to the original sale to display its details.
  3. Go to the Edit menu and choose Reverse Sale. This automatically creates a credit note for the entire sale. Notice the negative stock quantities and sale value.
  4. Click Record Reversal to record the credit note details.
Partial Returned Stock

This method can be used for partial returns and credits. For example, if a customer buys 4 items and only returns 2.

Partial Credit Notes

Partial Credit Notes

  1. Go to the Sales command centre and click Enter Sales.
  2. Select the required customer.
  3. Click the Layout button at the bottom of the window and select the Item invoice layout and click OK.
  4. Enter the quantities of the items being returned as negative amounts.

Raising credits when you do not track Inventory

Service Sale Credit Notes

Service Sale Credit Notes

Enter the account number to be credited into the Acct# field or select it from the list. This account should be the income account that the original sale was allocated to. Alternatively you could have an income account called ‘Sales returns/Credits’.

Applying the credit note

Application of Credit Notes

  • Pay Refund – Use the refund option if you are going to issue a cheque to the customer for the full or a partial amount of the credit. To pay a refund, with the credit note highlighted click the Pay Refund button along the bottom left of the Sales Register window. If it is a partial refund, overtype the Amount field with the value being refunded (the balance of the credit will remain and will still need to be settled). Click Record to complete the Settle Returns & Credits transaction.
  • Apply to Sale – Use this option to apply the full or partial value of the credit note against one of more of the cutomer’s outstanding invoices to reduce the balance owing. To apply the credit to an existing invoice, with the credit note highlighted, click the Apply to Sale button. Click into the Amount Applied column next to the invoice to which the credit is to be applied. If only a part of the credit is being applied this way, overtype the Amount field to reflect the amount being applied (the balance of the credit will remain and will still need to be settled). Make sure the Out of Balance and Finance Charge fields display $0.00 then click Record.

About Benn Franzmann

I am a qualified Accountant specializing in the setup and training of various forms of accounting software. I work for a number of different clients and also facilitate MYOB training at Melbourne CAE

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