Debit Note

Always Be Closing—ABC Definition

What is a debit note

A debit note is a document used by a seller to inform the buyer of his current debts or a document created by a buyer when returning goods received on credit. The debit note can provide information about a future invoice, or can serve as a reminder for funds currently due. For returned items, the total amount of credit provided may be included, as well as an inventory of the returned items and the reason for the return.

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Debit note

DISTRIBUTION OF FLOW

A debit note, also called a debit note, is generally used in business-to-business transactions. These transactions often involve an extension of credit, which means that a seller sends a shipment of goods to a business before the cost of the goods is paid by the buyer. Although real property changes hands, real money is not transferred until an actual invoice is issued. Rather, debits and credits are recorded in an accounting system to track inventory shipped and payments due.

Debit notes are separate from invoices because they are generally formatted in the form of letters and may not require immediate payment. This is true when the debit note is used to inform the buyer of future obligations on the basis of amounts which have not yet been officially invoiced.

Other forms of debit notes

In addition to the letter format, debit notes can also be provided as shipping receipts with the goods received. Although the amount due can be noted, payment is not expected until an official invoice is sent to the buyer. This can allow a buyer to return goods, if necessary, without having to pay in advance.

Certain debit notes can be sent in the form of informative postcards which are only used to remind the debt accumulated by the buyer. This can be useful in cases where the seller is unsure whether an original invoice has been received or reviewed. The postcard may also contain information on how the debt can be settled, such as relevant contact information.

Debit notes as optional documents

Not all businesses choose to send debit notes to buyers whose debts are outstanding or pending. Generally, a seller either considers it standard business practice and uses it according to internal procedures, or does not use it at all. In some cases, a buyer may request a document containing the information that would be contained in a debit note, in order to meet the requirements for internal record keeping.

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