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)

Anita is a Chartered Accountant, turned blogger and creator of the ever popular free Go Self Employed Email Mini Course, which has been completed by hundreds of attendees all over the UK. Using her 10 years experience in accounting, tax and operations for Small Businesses, Anita is on a mission to make finance simple for the self employed, so they can stop stressing about tax & finances and focus on building profitable businesses which will give them the lifestyle they dream of.