Debit note
A document a buyer sends a supplier to reduce what it owes, for example after returning goods or being overcharged.
In short
- It is the buyer's side of a correction; a credit note is the supplier's.
- It lowers the payable until the supplier issues a matching credit note.
- Tax recorded on the original invoice has to be adjusted too.
A debit note, also called a debit memo, is issued by a buyer to tell a supplier that it is reducing the amount it owes. Common reasons are goods returned, goods damaged in transit, a price higher than agreed or a short delivery.
Debit note versus credit note
The two describe the same correction from opposite sides. The buyer issues a debit note to claim the reduction; the supplier issues a credit note to confirm it. In many relationships the buyer's debit note prompts the supplier's credit note. Some businesses also use "debit note" for a supplier's additional charge, such as extra freight, so the term needs context.
How it is recorded
The buyer reduces accounts payable for that supplier and reverses the related expense or inventory. If sales tax was recorded on the original invoice, the input tax credit must be reduced to match. In Canada, the GST/HST rules allow either a credit note from the supplier or a debit note from the buyer to document a price adjustment, as long as it contains the required information.
Keeping it tidy
Open debit notes that the supplier never acknowledges are a common reason supplier statements do not agree with the buyer's records. Tracking them until the matching credit note arrives, or until the supplier confirms the adjusted balance, prevents disputes and duplicate payments later.
Worked example
Twelve damaged cases
A grocery chain receives 200 cases of glassware invoiced at $18 each, but 12 arrive broken. It issues a debit note for 12 × $18 = $216 plus $28.08 HST and pays the invoice net of $244.08. When the supplier's credit note arrives a week later, it is matched to the debit note and both are closed.