Concept, Function, and Differences of Debit and Credit Notes

Differences between Debit and Credit Notes – Every sale and purchase transaction usually uses a note as proof of purchase. The note itself in the Big Indonesian Language Dictionary (KBBI), is interpreted as a warning letter (appointment, note); official statement (from the ambassador to the government of a country or vice versa); explanation letter from the service (government, local government, and so on); sign of sale and purchase in cash.

In general, notes are made by the seller, then given to the buyer. Not infrequently, notes are made in duplicate. One for the shop owner and one for the buyer. Both have proof of the same transaction. Therefore, the note becomes one of the valid evidence in a transaction.

Notes can also be used as evidence when there is a misunderstanding between buyers or sellers. It can be strong evidence because the note is one proof of a valid transaction. Notes are also not only for cash sales, but also for other transactions.

Notes can be grouped into debit notes and credit notes. Debit note is a document made by the buyer to the seller as a statement of debt reduction or debit. Meanwhile, a credit note is a document that is used as evidence of accounts receivable due to the return of merchandise.

In the following, we will discuss debit notes and credit notes in more detail. The explanation below has been summarized from various pages on the internet.

Debit Note Concept

Memorandum in the Big Indonesian Language Dictionary (KBBI), is interpreted as a warning letter (appointment, note); official statement (from the ambassador to the government of a country or vice versa); explanation letter from the service (government, local government, and so on); sign of sale and purchase in cash.

Meanwhile, debit in KBBI is defined as money that must be collected from another person; receivables; notes on bookkeeping posts that increase the value of assets or reduce the amount of liabilities; the amount deducting the account holder’s deposits at his bank.

Therefore, a debit note can be interpreted as a type of document or note that is used as proof of a debt reduction transaction in the buying and selling process. This type of note is usually made by the seller and in duplicate. One belongs to the business actor and one to the buyer.

Usually, debit notes are used by buyers when there is a discrepancy or damage to the merchandise. Usually this happens together with the return of goods. Two notes made not without reason. One original receipt is given to the seller along with the return of the merchandise that has been paid for. Meanwhile, one other copy is kept by the buyer as proof of record.

here is the debit note function.

1. Debt Reduction

The debit note serves as evidence to request a reduction in the amount owed to the seller for the goods purchased. Therefore, with the reduction, the buyer’s debt bill will be less than the total of the previous agreement. However, this is done with a note that the goods are purchased on account receivable. So, the seller is obliged to return it. So with that, there will be a reduction in debt.

2. Correction of the Number of Items

Debit notes can be used as a correction to the amount of goods that have been mutually agreed upon. For example, if there is a total shortage of product shipments, a debit note can be used as evidence to state this when billing occurs. Thus, the buyer can show evidence and demand non-conformance of the goods received with the agreement.

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3. Correction of Goods Prices

Debit notes can be used as corrections to prices. For example, if the goods are not selling well or other things that have been approved, a correction is needed. This is done with the aim of making transactions between sellers and buyers more transparent and both of them benefit.

4. Proof of stock taking

Debit notes can be used as evidence of stock taking, namely the activity of checking or calculating product inventory before selling. In this way, business actors will know which goods have problems.

Meanwhile, the components that must be in a debit note are as follows.

  • PKP name of customer/buyer.
  • PKP name of business owner/seller.
  • Credit note number.
  • Information regarding the number of products debited.
  • Description of the type of product being debited.
  • Product price description per item.
  • Description of the total price of the debited product.
  • Debit note creation date.
  • Name and signature of customer/buyer.

Meanwhile, how to make a debit note as follows.

  • Dear, fill in the address of the intended business owner/seller.
  • Date Enter the date the note was made.
  • Note number, filled in according to the serial number of the note.
  • Document date, input the date when the goods purchase transaction was made.
  • Document, to be inputted with the related product document number.
  • No. Fill in the order number for the return of goods.
  • Description, to be inputted with the name of the product along with other explanations.
  • Total, input the total price of the returned product.
  • Amount, input the total price of the product.

To understand more about debit notes, You can listen to the following examples.

Credit Note concept

Memorandum in the Big Indonesian Language Dictionary (KBBI), is interpreted as a warning letter (appointment, note); official statement (from the ambassador to the government of a country or vice versa); explanation letter from the service (government, local government, and so on); sign of sale and purchase in cash.

As for credit in the Big Language Dictionary (KBBI), credit is a way of selling goods with non-cash payments (deferred or installment payments); loan money with repayments in installments; addition of account balances, remaining debts, capital, and data collection for savers; loan up to a certain amount permitted by a bank or other agency; the right side of the balance sheet (in Indonesia).

Therefore, it can be concluded that a credit note is a file or document that is used as evidence of a reduction in accounts receivable caused by returning merchandise due to a price reduction. Usually, credit notes are created for damage to shipped goods or merchandise returns.

Creation of a credit note signed by the seller. For sellers, the function of a credit note is a sign of a reduction in accounts receivable that will be billed to the buyer. Just like notes in general, credit notes are made in duplicate. One (original document) is given to the buyer and one document is kept by the seller.

Launching from the Jurnal.id page, credit notes are usually issued for the following reasons.

  • The customer returns goods or refuses service for some reason.
  • There was a price error on the original invoice.
  • There was an overpayment on the original invoice.
  • Goods sent were damaged during transit or the shipping process.

The purpose of the credit note as written on the Majoo.id page is as follows.

1. Recording Errors that Happened

In running a business, the seller will not be without mistakes. Mistakes that have been made must be recorded so that they can be used as lessons or reminders so that similar mistakes never happen again in the future.

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To record errors, you can use a credit note. The hope is that the error record in the credit note can be used as evaluation material so that this incident will not happen again in the future.

2. Administrative Order

Every transaction that occurs in a business must be recorded in a neat and orderly manner. Credit notes are one of the things that must always be recorded in accordance with accounting standards in Indonesia. Thus, all transactions related to goods will be neatly recorded in this memorandum. Therefore, if one day it is necessary to look back at the file or something happens, the proof of the transaction in the credit note can be evidence.

3. Shows that Business Persons are Responsible

Having a credit note gives the impression of the seriousness of business people in running their business. Of course this is proof that business people have a big responsibility. This can be seen from the credit note which can serve as a guide for the buyer that the company will not run away if something goes wrong.

4. Can Avoid Awkward Financial Reports

Every transaction must be recorded in financial statements which must be reported at least once a year. The report will show transactions that don’t make sense and the source of their activity is unknown. This can happen when business people pay less attention to notes and proof of transactions.

Therefore, to prevent this kind of thing from happening. Business people must be diligent in making notes or notes on any transactions that occur, including recording credit notes.

5. Providing Guarantees to Clients

The relationship between the company and the client/other party must be maintained. The goal is quite simple, namely to provide security guarantees in transactions. Having a personal or business level credit note will add to the client’s trust in the seller.

Having a credit note makes buyers feel comfortable when shopping. Convenience and security are important for the continuation of the buying and selling process or if something happens to the goods to be purchased, the seller is willing to reduce his receivables.

Credit notes are made not because there are no benefits or advantages in them. Launching from the Majoo.id page, here are the benefits of a credit note.

  • Administrative activities are made easy because all transactions carried out by the company have been recorded systematically.
  • Credit notes maintain the relationship between the seller and the buyer because there is trust between the two.
  • Credit notes can be used as notes to improve business operations both in product/service improvement and performance that must be improved.
  • If something happens in the future between the buyer and the seller, the credit note can be one of the handles to unravel the conflict.
  • Credit notes can be used as a basis for tracking sales errors that could have occurred when the product was in transit or damaged before delivery.

Difference between Debit and Credit Notes

Debit notes and credit notes are both proof of sales. The difference between the two lies in the system of use. Debt notes are documentary evidence sent by the buyer as a debt reduction statement from the business owner. This note is usually given together with the return of goods because there is a discrepancy between the agreement and the goods received.

Meanwhile, credit notes are documentary evidence sent by the business owner as a statement of return of goods from the buyer. The note serves as evidence to show a reduction in the price of receivables due to the breakdown of merchandise that was previously agreed upon.