Journal Entries of Credit Note

Before passing the journal entries of credit note, you should know the meaning of credit note. Credit note is that note which is given to the customer when we get his returned goods. By giving this paper or enote to customer, we tries to tell that we are crediting his account with his returned goods amount. Our customer can also give the note with his returned goods but it will be the debit note. Because we are the creditor for him. When he will return the goods to us, it means he will debit our account in his books. With this, he will not pay of the amount of his returned goods.

Now, we teach you the journal entry of credit note. We simple pass the sale return entry. When we receive the goods, it means goods comes into the business. Our stock asset will be increased. We will debit the sales returned account. With same amount, our debtor asset will be decreased. So, we will credit the debtor or customer account.

In our books 

Sales Return Account Debit Debtor or Customer Account Credit

In Our Customer's books 

When our customer will receive the credit note, he will pass following journal entry. note received

Creditor Account Debit Purchase Return Account Credit

Example : Suppose, Sham has received goods of Rs. 5000  from Ram. Ram has returned this good because this is not good. Sham is the supplier of Ram. So, Sham issued the credit note to Ram and pass the following journal entry in his books.

Sales Return Account Debit 5000 Ram Account Credit 5000