Accounting Entry for Credit Note

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Accounting Entry for Credit Note

What is a Credit Note?

A credit note is a document raised that reduces the amount a customer owes in part of in full.

If a business is VAT registered, then VAT must be added to the amount being credited at the prevailing rate, currently 20%.

The Accounting Entry for a Credit Note

For a VAT registered business:

Dr Turnover (profit & loss account)

Dr VAT (balance sheet)

Cr Trade Debtors (balance sheet)

For a non-VAT registered business:

Dr Turnover (profit & loss account)

Cr Trade Debtors (balance sheet)