What are a debit note and credit note with an example?
A debit note is actually a document which is used by a vendor to communicate to the buyer of the current debt obligations, or it is a document which is made by a buyer when returning the goods which were received on credit. The debit note can give data regarding a future invoice, or it may serve as an indication for funds which are due at present.
A credit note is also a document which is sent by a seller to the buyer, or we can say, a vendor to the customer, informing that a credit has been given to their account against the goods which was returned by the buyer.
The Company ABC buy goods worth rupees 200,00,0 from the Company DEF. The goods which arrived at Company ABC were damaged, and now Company ABC wants to return the goods to Company B Company ABC will promptly issue a debit note for the Company DEF which has all the appropriate information about the products including the VAT and original purchase amount. When Company DEF gets the debit note, and they review and sanction the request, and then they issue a credit note as evidence that they have given compensation to Company ABC