Credit note vs debit note

A credit note reduces the amount the customer owes. A debit note increases the amount the customer owes. The two are mirror images of each other; the only difference is the sign of the amount.

When to use which

• Credit note: returned goods, an invoice error (overcharge), a goodwill adjustment.
• Debit note: an under-billed amount, an additional charge (e.g. shipping), a price correction.

On the customer statement

Both credit notes and debit notes are aggregated into the customer's account statement. Credit notes appear as negative line items (they reduce the balance). Debit notes appear as positive line items (they increase the balance). The statement's closing balance is the net of invoices, credit notes, and debit notes over the period.