Credit note vs debit note vs refund

In a seller-issued invoice adjustment, a credit note reduces the charge and a debit note records an increase. A refund records money returned. Buyer-issued debit notes can instead request a supplier adjustment, so identify who issued the document.

By My Inventory Items · Practical document guide

Use a credit note for an agreed reduction

Examples include accepted returns, overcharges and agreed service allowances. Link the reduction to the original invoice and explain the affected items. Keep the document even when the invoice was already paid.

Identify the perspective of a debit note

A seller may use a debit note or supplementary invoice for an increased charge. In purchasing workflows, a buyer may send a debit note to request credit from a supplier. Confirm the issuer and the effect on the balance before posting it.

Track money separately

A refund needs a payment date, amount, method and transaction reference. Apply it against the customer credit. A credit note without a completed refund should not be described as proof that money has been returned.

Worked example

A paid £600 invoice receives a £120 credit note. The customer now has £120 credit. A completed £120 refund settles that credit; the same £120 must not also reduce a later invoice.

Illustrative arithmetic, not a customer case study.

Frequently asked questions

Does a credit note prove that a refund was paid?

No. Keep the refund transaction or payment confirmation linked to the credit note as evidence of money returned.

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 notes for returned goods and damaged stock

Document returned quantities, calculate an invoice credit and reconcile returned goods with sellable, damaged and quarantined stock.

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