Avoid these 5 mistakes while generating a debit note

Avoid these 5 mistakes while generating a debit note

Business

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What’s a debit note?

Are you a buyer who wants to return the goods you received from the seller on credit or if your supplier has not issued the invoice yet but the price of the commodity has increased? Worry not, you can always ask for a debit or a credit note from your distributor. For getting a debit note meaning, one should know that it acts as an affirmation of purchase from the buyer to the seller. You can click here for more detailed information on debit and credit notes.

In which circumstances debit notes can be issued?

Debit notes act as proof between two legitimate parties who are doing business together. These memos need to be kept in the accounting books for record purposes as well as an official authorised document.

There are a handful of conditions where you can make use of debit notes –

  • Commodities acquired by the buyer is vandalised or spoiled
  • There is a sudden increase in the price of the commodity
  • Incorrect invoice generated (extra amount of goods being delivered, the commodity was charged mistakenly at a lower price)

Use of debit notes in transactions

Debit notes are mostly used in business-to-business (B2B) transactions. In these transactions, debit note meaning to help both the customer and supplier with their accountability to keep their records right. Debit notes meaning to exhibit fiscal transactions between businesses.

Here is an example of how debit note meaning to be utilized-

Suppose a buyer named Epoxy Limited buys goods from a supplier named Caxon Limited worth INR 50,000 and the goods are shipped. But during the generation of the invoice, Caxon Limited mistakenly invoices INR 40,000. After realising this mistake, Caxon Limited raises a debit note of INR 10,000 to adjust the difference between the price of the goods and keep the record balanced.

5 mistakes that need to be avoided

Multiple errors are made by the individuals while issuing a debit note due to the vague and implausible knowledge about the GST law. Some common errors are discussed here so that both the buyer and supplier can get some valid information about these mistakes while generating debit notes.

  • Buyers need to keep track of the goods and commodities delivered by suppliers. In the case of service providers, the list of the service is provided by the service provider itself. Both parties need to keep track of the commodities or provided services while issuing a debit note.
  • Individuals, sometimes, keep the credit or debit notes on the sales side, which is actually wrong. They are claiming on the purchase side and therefore claiming the ITC, whereas they should reduce the sale side liability. For sale side reduction, only the seller has the right to issue a credit or debit memo as well as he needs to reduce his outward tax. A seller or supplier also needs to keep in mind that only he can issue a debit or credit note when changing of the sales amount occurs or in returning the sold goods.
  • It is also advisable to the seller to issue a clarified adjustment instead of just a debit or credit note. The main advantage of this is that the customer is not obliged to possess the confirmation receipt, the interim duplex VAT need not be paid.
  • Any amount of reduction in the base price, which can also include any amount of rebate for a premature payment, if it is not already attached with the net unit price.
  • The supplier also needs to keep in mind that if there is a transaction where the value added tax (VAT) was mistakenly not included. This kind of mistake needs to be avoided while issuing a credit or debit note.

Keeping the aforementioned points in mind will help you to avoid mistakes that often occur while generating a debit note.

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