In invoicing, a credit memo is the document for which a previously issued invoice is returned or cancelled.
Meanwhile, in accounting, the credit note is an item that is entered on the credit side and contrasted with the debit side, which is on the debit side.
The credit note can also be issued as a bank document to indicate to the depositor that he has received (or will receive) an amount.
From 2013, with the entry into force of the New Invoicing Regulations, a credit note is the same as an amendment invoice, which is its more technical name.
So, is there any difference between a credit note and an amendment invoice?
A credit memo is actually within the scope of correction invoices. But such invoices include more than just the credit memo, which is when the correction invoice is to return money to the customer. You could say that a credit memo is a negative correction invoice.
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When do I issue a credit memo?
A credit memo is an accounting document, the purpose of which is to adjust the amount a customer has paid in a business transaction.
For example, if there has been an error in invoicing, and the amount is positive for the customer (and negative as a sales invoice for the business). This may be because the VAT has been wrongly charged, or the tax base has to be changed.
When the customer returns what he has bought. For this reason, the credit note was also known as a credit note: the seller issues a credit note to inform that he has received the returned goods, and therefore this “credit” is in favour of the buyer.
You also issue credit memos when the salesman decides to lower the price that you agreed with the customer in the initial invoice for a certain product or service. This is usually because it is a special customer, because of a large volume purchase, or even if there have been incidents during the commercial transaction process or in the treatment of the customer.
The credit memo can be issued as long as four years have not yet passed since the tax was due.
What information must I include in a credit memo?
As with any other ticket, there is some basic information that every invoice or credit note must include:
- Name of the company issuing the invoice, with its address and VAT number.
- Customer’s name, address and VAT number.
- Include date and identification number of the invoice to which you are rectifying.
- What is the amount of rectification of the invoice.
- Specific numbering of the credit memo (which must be different from the initial invoice you are correcting)
- The amounts must be in the negative.
- You must include the tax rate and the amount that has been charged, excluding VAT.
Sample credit memo
There is no model in itself, what is important and necessary is that the credit note includes all the information detailed in the previous point.
According to the 2013 regulations, it is not necessary to indicate that it is a credit invoice, or the reason why it is carried out. However, it is not superfluous to include such data in some comment field. Sometimes it is not so much for the Treasury, but for better internal control of the trade itself.
As with everything that involves movement and recording of quantities in a business, credit notes must always be well filled in and recorded, so that the accounting of the business is not disrupted.
From InnovaComerce, we put at your disposal all the relevant tools so that you can manage your accounts, invoices, credit notes, etc in the easiest way.