Debit Note Format in Excel

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Debit Note Format in Excel

What is a debit note?

A debit note is a document a buyer prepares when returning goods acquired on credit or by a seller to alert the customer of existing financial obligations. A seller can use a debit note to remind a company of a pending invoice or to inform it that money is due. It will include:

  • The total anticipated credit.
  • An inventory of the returned items.
  • The reason for their return for returned items.

Reasons for issuing a debit note:

A client can issue a debit note if they purchase items from a seller or supplier and want to return them for any reason.

A customer begins a purchase return for products when the following conditions exist: the provider delivers faulty or damaged goods; the shape, size, or quantity is incorrect;

  • The provider failed to provide goods or services on schedule;
  • A bill contains calculation errors;
  • Suppliers levied higher taxes on goods or services;
  • The buyer does not wish to buy the goods or services.

The seller may also issue a debit memo in the following circumstances: when the seller has to make changes to the invoice.

  • When there is a billing amount adjustment.
  • When a buyer increases the size of their order.
  • To bring the buyer's attention back to their present debt.

How Does a Debit Note Work?

In most cases, a debit note, also known as a debit memo, is used in business-to-business transactions. Such transactions sometimes include an extension of credit, which means that a seller ships items to a company before the buyer's cost is paid.

The notice informs the customer that the seller has deducted money from their account. Although actual products are being exchanged, real money is not transferred until an invoice is given. Instead, debits and credits are recorded in an accounting system to manage dispatched inventories and outstanding payments.

Debit notes are distinct from invoices because they are typically formatted as letters and may not necessitate immediate payment. It is true when the debit note is used to notify the buyer of upcoming debt responsibilities based on amounts not yet formally invoiced.

Time limit to Issue a Debit Note

A buyer can issue a debit note at the earliest of the following.
On or before November 30th following the end of the financial year in which a person made such supply;
On or before the date of filing the annual return

Use Simple Debit Note Format in Word

You should note that under section 30(2), a person issuing a debit note must file yearly returns on or before December 31st of the fiscal year following the relevant fiscal year.

If such an annual return is filed after November 30th, the time restriction for issuing credit/debit notes will be November 30th only.

If the buyer fails to issue a debit note within the specified time frame, the buyer's tax duty, interest charge, and penalties will increase.

Debit Note Vs Credit Note

Issue Debit Note Format in Word by Vyapar

Significant differences between credit and debit notes are as listed below:

  • A Debit note or debit memo is a document that reflects that a debit is made to the other party's account. On the other hand, a credit note is an instrument used to inform the other party's account is credited in the party books.
  • A Debit note represents the positive amount while a Credit note represents the negative amount, which means a debit note lowers account receivables. In contrast, a credit note lowers the account payables.
  • In the case of a debit note, the purchase book is updated. Meanwhile, the sales return book is updated in the case of credit notes.
  • The customer generally issues a debit note to the supplier (seller of the goods). On the other hand, the credit note is issued by the supplier (the seller of the goods) to the customer (the buyer of the goods).
  • A debit note is issued during the credit purchase. In contrast, the credit note is issued during the event of credit sales.
  • A debit note is another form of purchase return of the product. However, the credit note is another form of sales return.
  • A debit note is issued in exchange for credit notes. Meanwhile, credit notes are issued in exchange for debit notes.
  • As a standard practice, a debit note is prepared in blue ink, while a credit note is written in red ink.

Why do you need a Debit Note format?

Difference Between Credit Note Format And Debit Note Format in Word

Let's understand why the debit note is required through the example:

The buyer issues the debit note or debit memo to initiate a purchase return for the goods procured on credit. It is done when the supplier fails to deliver goods or services on time or when they are overbilled.

Further, a debit note is issued when there might be a calculation error or when a buyer isn't interested and no longer wants to make a purchase. When higher taxes are applied on goods and services, or when goods offered to the buyer are damaged, defective or inappropriate in shape, size, or quantity.

The sellers can also issue the debit note when the seller wants an adjustment in the invoice, when the seller changes or increases the billing account, when the buyer suddenly increases the order quality, or to remind the buyer about their current debt obligations.

Content on the Debit Note Format in Word:

Debit Memo usually includes:

  • A serial number.
  • Date of the note.
  • A brief description of the prior business to business transaction.
  • Details of the item return.
  • The signature of an appropriate company authority.

A Debit Note invoice can include the following information:

  • The name of the company or issuer.
  • Zip code, issuer's address, web address, and phone number.
  • Date of creating a debit note.
  • Date of placing the order.
  • Order number for which it is issued.
  • Order terms and conditions.
  • Company's name (buyer).
  • Customer Id-as stated in the invoice.
  • Zip code, buyer's address, email id, and phone number.
  • Name of the contact person (buyer).
  • Invoice details- item name (goods and services), the reason for debit, item description, quantity, price, and the total amount.