What is a debit note?
A debit note is a document that increases the amount one business owes another, without issuing a brand-new invoice. It always refers back to an original invoice. It is used in two common ways:
- Seller to buyer – the original invoice was too low: extra goods were delivered and accepted, prices were under-charged, or extra charges such as freight were agreed. The debit note asks the buyer to pay the difference.
- Buyer to supplier – the buyer returns goods or finds them faulty and issues a debit note to record the amount the supplier now owes back. The supplier normally answers with a credit note.
Debit note vs credit note
| Debit note | Credit note | |
|---|---|---|
| Effect on the amount owed | Increases it | Reduces it |
| Typical issuer | Seller (extra charge) or buyer (return claim) | Seller |
| Typical reasons | Under-billing, extra goods, extra charges, purchase returns | Returns, discounts, over-billing, cancelled orders |
What to include on a debit note
- The words "Debit Note" and a unique debit note number (for example DBN-001)
- Your details and the other party's details, with tax numbers if registered
- The original invoice number and date it relates to
- Each item or charge, quantity and rate, and the tax on it
- The reason for the debit, stated clearly
- The total debit and when it should be paid
Debit notes and VAT / GST
In many tax systems a debit note adjusts the tax on the original supply. In India, for example, a supplier issues a debit note under GST when the taxable value or tax charged on the original tax invoice was too low, and reports it in the GST return for the period it is issued. In VAT countries, a supplementary invoice or debit note is used in a similar way. Show the tax separately on the debit note, and check your country's rules for what must appear on it.
How to create a debit note with this tool
- Enter your details and the customer or supplier under "Debit to".
- Set the debit note number and the date the extra amount is due, and write the original invoice number and date in the reason.
- Add each additional charge or returned item as a line, then the tax rate.
- Explain the reason in the notes, then download the PDF and send it with a copy of the original invoice.
General information only, not tax advice. Rules for debit notes, credit notes and supplementary invoices differ by country.
Frequently asked questions
When should I issue a debit note instead of a new invoice?
When the extra amount relates to a transaction you already invoiced – for example an under-charge or additional units on the same order. A debit note keeps the link to the original invoice clear for both sides' accounts.
Does a debit note need a tax line?
If the original invoice included VAT, GST or sales tax and the extra amount is taxable, show the tax on the debit note too. In GST and VAT systems the debit note adjusts the tax you reported.
Who issues a debit note – buyer or seller?
Both use them. A seller issues one to charge more; a buyer may issue one to a supplier to claim money back for returns or faults, and the supplier then confirms with a credit note.
How do I number debit notes?
Use their own sequence, separate from invoices, such as DBN-001, DBN-002. Always reference the original invoice number on each one.
