A credit note/credit memo is issued to indicate a return of funds in the event of an invoice error, incorrect or damaged products, purchase cancellation or otherwise specified circumstance. It is a document that is used to reduce the amount owed by the buyer for goods or services that have already been purchased.
Accounting Example:
When a credit note is created:
Parent Account | Account | Transaction / Reference | Date / Client / Note | Debit | Credit |
Revenue | Sales | Credit Note | Jan 1, 2022 | 10.00 | - |
Customer Credit | Customer Credit | Credit Note | Jan 1, 2022 | - | 10.00 |
When a credit note is applied to an invoice:
Parent Account | Account | Transaction / Reference | Date / Client / Note | Debit | Credit |
Customer Credit | Customer Credit | Payment / Invoice | Jan 1, 2022 | 10.00 | - |
Accounts Receivable | Accounts Receivable | Payment / Invoice | Jan 1, 2022 | - | 10.00 |
Leveraging Railz to use Journal Entries to add credit note:
Railz has dedicated credit notes endpoints for normal accounting scenarios. However, in other situations, for instance, to record unallocated credit notes, or if an Accounting Service Provider does not support posting credit notes, you may follow the below steps to add credit note as a journal entry:
Determine the accounts to be debited and credited: In a credit note transaction, the account to be debited is typically the sales revenue account associated with the original sale, and the account to be credited is usually the accounts receivable account associated with the buyer.
Post a new journal entry and input the appropriate accounts to be debited and credited.
Enter the credit note amounts in the appropriate field of the journal entry.
Include any additional information: You may want to include additional information in the journal entry such as the reason for the credit note and any other relevant details.
Payload example:
You can use our POST /journalEntries endpoint to add a $10 debit line item as a credit note, for example, from the revenue account and a $10 credit line item also as a credit note, for example, for the customer credit account.
{
"connection":
{
"businessName": "{{businessName}}",
"serviceName": "{{serviceName}}"
},
"data":
{
"currency": "USD",
"currencyRate": 1.3,
"postedDate": "YYYY-MM-DD",
"lines":
[
{
"accountRef": "ID OF REVENUE ACCOUNT FROM ASP - SEE COA END POINT ",
"description": "LINE ITEM DESCRIPTION",
"amount": 10,
"type": "debit"
},
{
"accountRef": "ID OF ACCOUNTS RECEIVABLE ACCOUNT FROM ASP - SEE COA END POINT ",
"description": "LINE ITEM DESCRIPTION",
"amount": 10,
"type": "credit"
}
],
"memo": "SOME MEMO"
}
}
For more information: