Credit notes for returned goods and damaged stock

A returns credit note records the agreed reduction for goods from an earlier sale. Match returned quantities to invoice lines and keep the credit separate from the physical stock receipt.

By My Inventory Items · Practical document guide

Match the return to the sale

Record the original invoice, product references, quantities accepted and the return reason. Confirm whether freight or a restocking adjustment is included in the agreement before calculating the credit.

Credit the agreed amount

Use the relevant original prices, discounts and tax treatment for the items being credited. Do not credit an entire invoice when only part of the order is returned. Retain the return authorization and delivery evidence.

Inspect before updating available stock

Check condition and quantity on receipt. A damaged item may qualify for a customer credit while remaining unavailable for sale. Record inspection, quarantine, repair or disposal separately from the credit note.

Worked example

Three returned units at £80 each give £240 net. At an illustrative 20% VAT, the tax adjustment is £48 and total credit £288. An unpaid £960 invoice then has £672 remaining, assuming no other payments or adjustments.

Illustrative arithmetic, not a customer case study.

Frequently asked questions

Can I credit a return before the goods arrive?

Record the agreed credit timing and return status explicitly. A credit does not prove physical receipt; update stock only when the actual receipt and inspection are recorded.

Official sources and scope

The previews use UK-style GBP and VAT details. The UK guide draws on HMRC guidance; other guides explain document workflows and illustrative arithmetic. Source links checked on 17 October 2026.

Credit note guides

Credit note format and essential fields

Use a credit note checklist covering document numbers, original invoice references, reasons, credited items, tax and settlement details.

Credit note vs debit note vs refund

Compare seller-issued credit notes, debit notes and refunds, with examples of invoice increases, reductions and money returned.

UK VAT credit note: references and adjustment checklist

Understand UK VAT credit note references, genuine adjustments and supporting records, with links to HMRC guidance and a GBP example.

Partial credit note example and remaining balance

Calculate a partial invoice credit after a payment, avoid double counting refunds and reconcile the customer’s remaining balance.

Give every adjustment a clear record.

Enter your own details in the free credit note generator. It offers GST fields and browser print or PDF output in its own layout. Review the tax fields for your transaction.

Create a credit note

Invoice and billing guides Payment receipts Debit note templates and guides