Debit Note

A debit note (or debit memo) is a document used in commercial transactions to record an increase in a buyer’s liability or to notify a seller of returned goods. It serves as a formal communication that an account has been debited or that an adjustment is required, and it helps maintain accurate records of obligations and inventory adjustments.

Key takeaways

• Issued by sellers to inform buyers of amounts owed, or by buyers to notify sellers of returns/adjustments.
• Typically informational — not always a demand for immediate payment like an invoice.
• Used to correct underbilling, charge for additional services, or record returned goods.
• Increases the buyer’s payable balance; a credit note does the opposite.
• Common in B2B transactions where goods are shipped on credit.

How debit notes work

In B2B transactions where payment is deferred, vendors may ship goods and record the transaction in their accounting system. A debit note notifies the buyer that the seller has debited the buyer’s account for goods or adjustments. It may accompany shipped goods, be sent as a reminder of an outstanding balance, or be issued after an invoice error is discovered. Money typically changes hands only when an invoice is issued or paid.

When and why they’re used

Common uses include:
* Informing a buyer of payment due for delivered goods or services.
Correcting underbilled invoices by documenting the additional amount owed.
Charging for ancillary items or services (e.g., sublet warehouse rent).
Recording returned goods: the buyer may issue a debit note to show returned items and the value to be adjusted.
Acting as a shipping receipt or reminder when an official invoice will follow.

Key elements of a debit note

Most debit notes include:
* Date of issue
Seller’s name and address
Buyer’s name and address
Description and quantity of goods or services
Unit price and total amount
* Reference to the related invoice or purchase order (if applicable)
These elements ensure clarity for accounting and reconciliation.

Debit note vs. credit note

• Debit note: increases the buyer’s liability (shows amounts owed or adjustments that increase the account balance).
• Credit note: decreases the buyer’s liability (records credits for returns, pricing errors, cancellations).
  A credit note is not a refund but a recorded credit that can offset future purchases or invoices.

Debit note vs. invoice

• Invoice: a formal bill requesting payment for goods or services provided; typically expects payment by a due date.
• Debit note: a notice that an account has been debited or needs adjustment; may be informational and not always a direct payment request.
  Both documents support accounting records, but invoices generally trigger payment, whereas debit notes document account changes or corrections.

Who issues debit notes

• Sellers/vendors commonly issue debit notes to notify buyers of increased amounts due or adjustments.
• Buyers may issue debit notes to suppliers when returning goods or requesting an adjustment for overcharges or other discrepancies.

Best practices

• Include clear references (invoice or purchase order numbers) to simplify reconciliation.
• Use consistent templates so key elements are always present.
• Communicate promptly and attach supporting documentation (shipping receipts, return authorizations, inspection reports) when applicable.
• Maintain copies in both seller and buyer accounting records for auditability.

Bottom line

Debit notes are practical accounting documents used to communicate increases in a buyer’s payable balance or to record adjustments and returns. They support transparent record-keeping in credit-based transactions and work alongside invoices and credit notes to keep accounts accurate.