Topics
Introduction to Book-Keeping and Accountancy
- Accounting
- Book-Keeping
- Accountancy
- Book-Keeping vs. Accountancy
- Basis (Methods) of Accounting System
- Qualitative Characteristics of Accounting Information
- Basic Terms in Accounting
- Transaction
- Capital and Drawings
- Debtors, Creditors and Bad Debts
- Expenditure and Its Types
- Discount and Its Types
- Solvent Person vs. Insolvent Person
- Accounting Year
- Trading Concerns vs. Not for Profit Concerns
- Concept of Goodwill
- Fundamentals of Business Earnings
- Concepts of Assets, Liabilities and Net Worth
- Accounting Principles
- Accounting Concepts
- Core Accounting Concepts
- Accounting Standards
Meaning and Fundamentals of Double Entry Book-Keeping
Journal
- Accounting Documents
- Goods and Service Tax(GST)
- Types of Accounting Documents
- Voucher
- Tax Invoice (Under GST)
- Credit Memo
- Receipt
- Cheque
- Types of Cheques
- Books of Accounts
- Books of Accounts > Journal
- Journal Entries
- Journal Entries > Goods Account
- Journal Entries > Recording Discount in Journal
- Journal Entries > Other Important Journal Entries
Ledger
Subsidiary Books
- Concept of Subsidiary Books
- Cash Book
- Cash Book > Simple Cash Book (Single Column Cash Book)
- Cash Book > Two Column Cash Book (With Cash and Bank Columns)
- Cash Book > Petty Cash Book
- Simple Petty Cash Book
- Analytical Petty Cash Book
- Purchase Book
- Purchase Return Book
- Sales Book
- Sales Return Book
- Journal Proper
Bank Reconciliation Statement
- Accounting Documents Used in Banking
- Accounting Documents Used in Banking
- Pay-in-Slip
- Withdrawal Slip
- Bank Pass Book
- Bank Statement
- Bank Advice
- Concept of Virtual Banking
- Bank Reconciliation Statement(BRS)
- Cash Book vs Pass Book : Causes of Differences
- Time Difference(Regarding BRS)
- Errors and Omission Made by Bank or Businessman
- Formats of BRS
- Preparation of BRS
- Cash Book and Pass Book Comparison for Common Period
- Cash Book and Pass Book Balances for Different Periods
- Bank Balance as per Cash Book (Favourable / Debit Balance)
- Bank Balance as per Pass Book (Favourable / Credit Balance)
- Overdraft as per Cash Book (Unfavourable / Credit Balance)
- Overdraft as per Pass Book (Unfavourable/Debit balance)
- Reconciliation of Debtors and Creditors
Depreciation
Rectification of Errors
Final Accounts of a Proprietary Concern
Single Entry System
- Concept of Single Entry System
- Single Entry System vs. Double Entry System
- Parts of Single Entry System
- Statements of Affairs
- Statement of Profit or Loss
- Statement of Profit or Loss > Net Worth Method
- Practical Problems on Single Entry System
- Definition: Credit Memo
- Credit Memo vs Credit Note (Voucher & Tax Invoice types)
- Examples: Credit Memo vs Credit Note (Voucher and Tax Invoice Types)
- Details of a Credit Memo
- Common Credit Memo Types in India, with Examples
- Key Takeaways
Maharashtra State Board: Class 11
Definition : Credit Memo
A credit memo (also called a credit note) is a document issued by a seller to a buyer, used to reduce the amount the buyer owes for goods or services previously invoiced. This typically happens when goods are returned, there is an overcharge, or an allowance/discount is granted after the sale.
Maharashtra State Board: Class 11
Credit Memo vs Credit Note (Voucher & Tax Invoice types)
| Item | Credit Memo | Credit Note (Voucher type) | Credit Note (Tax Invoice type) |
|---|---|---|---|
| What is it? | A document showing a reduction in the amount a buyer owes to a seller, usually after goods are returned or an error in invoice | An accounting entry or voucher prepared to record that a customer’s account has been credited, often as part of internal records. | A GST-compliant legal document issued by a registered supplier when invoice/tax needs to be reduced (after sales returns or overcharging) |
| Who uses/issues it? | Seller to Buyer (mainly in business transactions) | Accountant/bookkeeper, internally within the company | Registered supplier to buyer, submitted in GST returns |
| Purpose | Notifies buyer about reduction in their payable amount or corrects previous invoice | Captures the adjustment in the books (as a voucher entry) and shows that the customer gets “credit” in records. | Legally adjusts invoice/tax value under GST rules (affects tax filing and ITC for both sides) |
| Is it an official invoice under GST? | Not a legal tax invoice, mainly a commercial document | No—just an internal record, not shared with GST authorities | Yes—considered an official adjustment to a tax invoice, and must be reported in GSTR-1/monthly GST returns |
| Main Fields/Format | Memo/Note Number, Date, Original Invoice Ref, Amount, Reason | Voucher Number, Date, Party, Ledger Account, Amount, Description | Credit Note No, Date, GSTIN/Supplier, Buyer Details, Invoice Ref, Tax breakup (CGST/SGST), Reason, Amount |
| Use in Accounts | Directly reduces accounts receivable, references the invoice | Used in voucher entry in accounting software/books | Adjusts output tax (and taxable value for seller and buyer; both must record it officially) |
| Legal Requirement | Not mandatory by law but good practice in business | Not a legal requirement, just good accounting | Mandated by GST law if certain adjustments needed |
Important Terms
- GSTR-1: Monthly GST form filed by suppliers to report their outward supplies and any credit/debit notes issued in that period.
- Accounts receivable = debtors
- GST-compliant document: A document that follows/is as per GST rules
- Taxable value is the actual price paid or payable for goods or services, including extra costs like packaging and shipping, but before GST is added; this is the value on which GST is calculated.
- Output tax is the GST that a seller collects from customers on each sale and then pays to the government as part of their tax liability.
Maharashtra State Board: Class 11
Examples : Credit Memo vs Credit Note(Voucher and Tax Invoice Types)
| Document Type | Who Issues? | Why Issued? | Example |
|---|---|---|---|
| Credit Memo | Seller | When goods are returned or there is an invoice error | Priya Ltd sells goods to Rajesh. Rajesh returns damaged goods worth ₹1,000. Priya Ltd gives a credit memo reducing Rajesh’s amount payable by ₹1,000. |
| Credit Note (Voucher Type) | Accountant/Internal Staff | To record adjustment in company accounts | The accountant creates a voucher entry “Credit Note” in software when goods worth ₹1,000 are returned by Rajesh, adjusting the company’s records. |
| Credit Note (Tax Invoice Type) | Seller (GST Registered) | To officially reduce taxed invoice value as per GST | The supplier issues a GST Credit Note, reducing the invoice from ₹5,000 to ₹4,000 due to returned goods, and files it in GSTR-1 for tax adjustment. |
Maharashtra State Board: Class 11
Details of a Credit Memo
| Detail | Common to All Credit Memos | Additional for GST Credit Note (Tax Invoice Type) | Additional for Internal/Business Use Only |
|---|---|---|---|
| Title | “Credit Memo” or “Credit Note” | “Credit Note” (GST-compliant) | May use “Memo” or “Voucher” |
| Unique Number | Yes (serial number) | Yes (within 16 characters, as per GST rules) | Yes |
| Date of Issue | Yes | Yes | Yes |
| Seller’s Details | Yes (name, address) | Yes (GSTIN, business name, address) | Yes (even in internal records) |
| Buyer’s Details | Yes (name, address) | Yes (GSTIN, business name, address) tallyassist +1 | May be less detailed |
| Reference to Invoice | Yes (original invoice number/date) | Mandatory | Should mention it if adjustment relates to an invoice |
| Description of Goods/Service | Yes (name, quantity, price) | Yes, plus HSN/SAC code (GST requirement) | Usually brief |
| Amount Credited | Yes (total reduction) | Taxable value + GST split (CGST, SGST/IGST, etc.) | Yes, usually only net value |
| Reason for Credit | Yes (return, error, discount, etc.) | Yes (clear reason required) | Yes, even if for internal control |
| Authorized Signature | Yes (manager/accountant/seller) | Yes, with digital signatures allowed | Optional |
| Tax Details | Not required unless GST applicable | Mandatory (GST taxonomy, amounts, rates, reversal) | Not required |
| Place of Supply | Optional | Mandatory under GST | Not required |
| Filing in GST Returns | No | Mandatory (GSTR-1, 2A/2B, and 3B reporting) | No |
| Purpose | Reduces buyer’s payable/adjusts receivable | For official tax reversal, ITC adjustment | For internal record (not a legal document) |
Maharashtra State Board: Class 11
Common Credit Memo Types in India,with Examples
| Type | What It Means / When Used | Example |
|---|---|---|
| Sales Return Credit Memo | Issued when goods sold are returned by the customer (sales return) | Goods worth ₹10,000 returned by buyer |
| Price Dispute Credit Memo | Issued to fix an error in the price charged on the invoice | The price on the invoice was ₹8,000 instead of ₹7,000, so a ₹1,000 credit memo was issued. |
| Discount/Allowance Credit Memo | Issued when a post-sale discount or allowance is given to the buyer | Extra ₹500 discount after the invoice is raised |
| Overpayment/Refund Credit Memo | Issued if the customer pays more than needed, or for refund purposes | The buyer paid ₹12,000 instead of ₹10,000; a ₹2,000 credit memo/refund was issued. |
| Tax (GST) Credit Note | GST-compliant credit memo (credit note) for returns, errors, or discounts | Sales return reported and GST reversal done officially |
| Internal Credit Memo | Used inside the company for records; not sent to buyer | The accountant records an adjustment internally in the accounting department. |
Maharashtra State Board: Class 11
Key Takeaways
- Credit memo: a general document issued by the seller to reduce the buyer’s due amount after sales returns or invoice errors.
- Credit note (voucher): Internal company record; not a legal GST/tax document.
- Credit note (tax invoice): Official GST document; adjusts tax and invoice values; must be reported in returns.
- Details in a credit memo/credit note include supplier and buyer info, a unique number, date, reference to invoice, item/amount returned, reason, and GST details if applicable.
- Types of credit memos: for sales returns, price corrections, discounts, tax/GST adjustments, or refunds/overpayments.
