When Will Business Owners Issue Debit Notes?

Have you ever bumped into a situation where the goods or merchandise that your supplier sent to you is not what you want, or the goods had become spoilt? If this happens, what would you do? One of the ways that you can solve this issue is by sending a debit note to your supplier.

The debit note is a document that the buyer of the merchandise would send to the supplier when some of the goods are defective. The debit note states that the buyer will reduce the amount payable after making necessary adjustments based on the defective goods. The buyer may also send this note to the supplier when the supplier has overcharged him for the goods that he did not purchase.

Based on the explanation above, we will be able to know some characteristics of the debit note. Firstly, the buyer will always be the one that issues the debit note. The buyer wants to use the credit note (Also see What is the Use of Credit Notes?) to inform the supplier that he has debited the supplier’s account due to certain reasons. He will provide the supplier with the reasons why he debited (Also see Understanding credit and debit in the business) the supplier’s account, accompanied by the statement which showed the debit to that account.

In most cases, the buyer will only issue the debit note if he makes the purchase on credit and found out that there is a reduction for the goods purchased due to specific reasons. The situations that may lead to this include the incorrect number of items purchase, where the goods received is higher than what the buyer wants, or the merchandise was found defective.

After the buyer has issued the debit note, the credit purchase that it has made will decrease, and the purchase return will increase. Business owners (Also see Tips to Become Intelligent Business Owners)  should reflect this in the books of accounts by debiting purchase and crediting purchase returns (Also see How to Recognize Revenue when Rights of Return are Present). This is the part that some business owners may need to seek help from an accounting firm in Johor Bahru as they are not familiar with the accounting treatment regarding the return of goods.

A debit note will only come into effect if the supplier accepts it. This is because the supplier will issue a credit note back to the buyer, where on the credit note, the supplier will state his acceptance on the debiting of the supplier’s account. At the same time, the supplier will make corresponding adjustments in his books of accounts too.