Explained
It names the original invoice by number and date, so the original stays exactly as issued and the correction appears beside it instead of replacing it. That is what makes books auditable: a reviewer sees what was issued first, what was corrected and why. On a tax invoice the credit note reverses the tax as well, not only the amount.
Example
A customer returns an item worth 500 from a 2,000 invoice: a credit note for 500 plus its tax, leaving 1,500 and its tax due.
Related terms
- InvoiceAn invoice is the document in which a seller asks a buyer for the price of what was delivered, listing the items, their quantities and prices, the tax and the total due.
- Tax invoiceA tax invoice is issued by a VAT-registered seller and shows the value of the goods or services, the VAT on them and the seller’s tax number.
- Value added tax (VAT)Value added tax (VAT) is an indirect tax charged on goods and services at each stage of sale and borne by the final consumer.