In this article, you will learn how to use a credit note in accounting and which postings are relevant for this process. You will also learn how to post granted credit notes and their subsequent use to offset receivables.
Content:
- What is a credit note, and how is it granted?
- Detailed use of a credit note
- Posting entries for a credit note
- Summary
Fast Lane:
- A credit note is initially posted to the clearing account 1369.
- Once the credit note is used, the posting is made to account 8790 (Granted Discounts).
- The clearing account 1369 is balanced at the same time.
What is a credit note, and how is it granted?
A credit note is a type of discount or refund granted to a member. It is often used to reduce receivables or credited as a discount for future services. In accounting, a credit note is initially posted to the clearing account for credit notes (account 1369).
Detailed use of a credit note
When a previously granted credit note is actually used, a rebooking occurs. The amount of the credit note is posted to account 8790 - Granted Discounts to represent the reduction in receivables. At the same time, the clearing account for credit notes (1369) is balanced.
The posting is made using the tax rate of the original receivable since the use of the credit note offsets a previously issued invoice.
Posting entries for a credit note
1. Granting the credit note:
Debit: 1369 - Credit Note Clearing Account
Credit: Member Account
This represents the provision of the credit note without it being posted directly to the revenue accounts. The actual use of the credit note may occur at a later time.
2. Use of the credit note:
Debit: 8790 - Granted Discounts
Credit: 1369 - Credit Note Clearing Account
Upon use, the granted discount is posted to the corresponding revenue account, and at the same time, the credit note clearing account is balanced.
Summary
The posting of a credit note in accounting occurs in two steps: first, the credit note is recorded in clearing account 1369. When the credit note is actually used, a rebooking occurs to account 8790 (Granted Discounts), while the clearing account is balanced. Since the credit note is not always granted and used at the same time, there is often a time delay between the postings.