Credit Notes are negative sales invoices, where you owe a customer for returned products etc. Likewise a Credit Note could be a negative supplier invoice where a supplier owes you money for products you may have returned for credit.
In the quick video below we have created a credit note for a customer who has returned goods and then applied that credit note to an outstanding receivable invoice that a customer still owes, using the Adjust > Contra option.
Alternatively to the Adjust Contra option, assuming that the customer reduced their payment for the original invoice, you could apply the credit note at the time of entering the receipt.
e.g., Autumn Fabrics purchased $603.75 of widgets on inv. 2135 and returned $42.00 of widgets on the Credit Note 2136.
The customer then sent in a payment for the difference $561.75, to pay off the outstanding amount. You could then clear the two transactions (invoice & credit Note) from your receivables in the Receipt like so instead of adjusting a head of time as described in the video.
Note: Since credit notes relate to invoices, you cannot create a credit note in Cashbook as it is cash based accounting, not accrual based with AR & AP. So you handle returns from customers as negative receipts.
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