Customer credit note

A credit note takes some or all of a posted sales invoice back. You use it when a customer returns goods or you take back a service. Confirming it lowers what the customer owes, reverses the income and the VAT, and puts returned goods back in stock at their original cost. In the app you start it with the Return button.

Where: Sales › Invoices › open the invoice › Return. Or Sales › Credit notes › New credit note
Number: ARCN-000001, given when you confirm the return
Posts to: Sales Returns and Allowances, Output Tax Payable, Accounts Receivable, Inventory, Cost of Goods Sold. Also Rounding Difference, and Customer Deposits when the invoice was paid
Who: Managers and admins

What it’s for

A customer brings back some or all of the goods on an invoice.
You take back a service you invoiced.
The credit is counted in quantities of the invoice lines. It uses the price, discount and VAT rate of the invoice. You cannot type an amount of your own.
A credit note never pays money out. If the customer already paid, the paid money becomes a customer advance. You can pay that advance back later from the customer’s page. See Customers.
Bills made at the till are not returned here. Open them in Sales history: choose the ⋯ menu on the bill, then Return. Invoices made at the till are returned there too, and the till must have an open register.

Making a credit note, step by step

Open the posted invoice and choose Return. Or go to Sales › Credit notes, choose New credit note, and pick the invoice.
Type a Return qty for each item that comes back. Or choose Return all remaining items.
For each stock item, say what became of it under Item condition.
Choose a Reason for the return.
Open More options if you need a different date, a reference or notes.
Choose Review return. The app works out the exact amounts. Check them.
If goods go back in stock, tick the box that says they have arrived.
Choose Confirm return. The credit note gets its number. You can print it, then press Done.

Fields

Field	What it means	What it changes
Customer and Original invoice	Shown for your information. You cannot change them	The credit goes against this customer and this invoice
Sold	The quantity on the invoice	Nothing
Returned before	The quantity already credited on earlier credit notes	Nothing
Can return	What is left to credit on the line	The most you can enter in Return qty
Return qty	How many to take back now. You can enter part of a line	The credit amount for the line, and the stock that comes back
Item condition (the Goods column on the New credit note page)	For stock items only: Back in stock, Damaged – not back in stock, Not received, or Some back in stock…. A service has no condition	Only goods marked back in stock are added to stock. The others are credited but not restocked
Back in stock qty	Shown for Some back in stock…. How many of the returned items go back	The stock that comes back
Reason for the return	Changed mind, Wrong item, Damaged or faulty, Wrong size, or Other with your own words (3 to 500 characters). Required	Saved on the credit note and printed on it
Return date (under More options in the window)	Starts as today. It cannot be before the invoice date or after today	The date of the journal entry, the stock movement and the VAT
Reference (optional)	For example the customer’s return number. Up to 120 characters	Saved with the credit note. You can search for it
Notes for your team (optional)	Up to 2,000 characters	Saved on the credit note. The note is also printed on it

Buttons

Nothing touches your accounts until Confirm return.

Button	When you see it	What happens	Accounts
Return	On a posted invoice that still has something to credit, if you may make credit notes	Opens the return window for that invoice	No change
New credit note	On the Credit notes list, if you may make credit notes	Asks you to choose a posted invoice, then opens the return	No change
Return all remaining items	On the items step	Fills each line with what is left to return	No change
Review return	On the items step	Checks your entries and shows the amounts, the stock and what happens to the money	No change
Back	On the review step	Returns to the items with every entry kept	No change
Confirm return	On the review step	Records the credit note and gives it a number	Posts
Cancel	Before you confirm	Closes the window. If you entered quantities it asks first: “Discard this return? The items and reason you entered will be lost.”	No change
Print…	On the result and on every posted credit note	Opens a preview. Then print it, save it as a PDF or download the PDF	No change
Done	On the result	Closes the window	No change
Edit credit note	On a posted credit note, if you may edit and nothing blocks it	Change the date, quantities, reference or notes. Restocking shows as a Goods received and saleable — return to stock tick box with a Restock qty box. Asks for a reason	Restated on its own date
Delete credit note	On a posted credit note, admins only, if nothing blocks it	Asks for a reason. Removes the credit note’s effects	All effects removed

Statuses you will see: a credit note is Posted or Deleted. The invoice shows Part credited or Fully credited. Once an invoice is fully credited, Return is no longer shown on it.

What gets posted

Confirming writes one journal entry, dated on the Return date. Lines with a zero amount are left out.

Sales Returns and Allowances is debited with the income given back, after the invoice’s discount. This is used for goods and for services.
Output Tax Payable is debited with the VAT given back.
Accounts Receivable is credited with the credit note total.
For goods that go back in stock, Inventory is debited and Cost of Goods Sold is credited, at the cost the invoice recorded.
If your company rounds invoice totals and this return finishes the invoice, Rounding Difference is debited to give the round-off back.

Example 1Part of an invoice: one item and the servicePrices exclude VAT · the item goes back in stock

The invoice (the credit sale on the Invoices page)241.50
Credited: 1 of 2 items, 100.00 less 10.00 discount90.00
Credited: the service50.00
VAT 5% on 140.007.00
Credit note total147.00
Cost of the 1 item that goes back (5.00 each)5.00

Account	Debit (AED)	Credit (AED)	Why
4100Sales Returns and Allowances	140.00		Income given back, after the discount
2100Output Tax Payable	7.00		VAT you no longer owe the FTA
1100Accounts Receivable		147.00	The customer owes 147.00 less
1200Inventory	5.00		The item is back in your stock
5000Cost of Goods Sold		5.00	The cost of that sale is reduced
Total	152.00	152.00	Balanced

The service has no stock, so it has no stock lines. The invoice stays in history: it is not changed.

Example 2The whole invoice, prices include VAT, nothing goes back in stockItem condition: Damaged or Not received

The invoice: 20 items at 2.10, VAT included42.00
VAT inside the price (42.00 × 5 ÷ 105)2.00
Items credited20
Items back in stock0

Account	Debit (AED)	Credit (AED)	Why
4100Sales Returns and Allowances	40.00		Income given back
2100Output Tax Payable	2.00		VAT you no longer owe the FTA
1100Accounts Receivable		42.00	The customer owes 42.00 less
Total	42.00	42.00	Balanced

There is no Inventory line and no Cost of Goods Sold line. The customer gets the credit, but the goods did not come back, so the cost of the sale stays in your accounts.

Example 3The return that finishes a rounded invoiceSettings › Rounding policy: totals rounded to 0.25

3 items at 12.3537.05
VAT 5%1.85
Before rounding38.90
Invoice total, rounded to 0.2539.00
Cost of the 3 items (5.00 each)15.00

Account	Debit (AED)	Credit (AED)	Why
4100Sales Returns and Allowances	37.05		Income given back
2100Output Tax Payable	1.85		VAT you no longer owe the FTA
6760Rounding Difference	0.10		The round-off on the invoice is given back
1100Accounts Receivable		39.00	The customer owes 39.00 less
1200Inventory	15.00		All 3 items are back in your stock
5000Cost of Goods Sold		15.00	The cost of that sale is reduced
Total	54.00	54.00	Balanced

The credit note is 39.00, the same as the invoice, so a fully credited invoice nets to nothing. A return of only 1 of the 3 items carries no round-off and posts no Rounding Difference line.

Example 4An invoice made before the company was VAT registeredThe credit note has no VAT line

The invoice: 20 items at 2.10, made while not VAT registered42.00
Credited and put back in stock5 items
Credit note total10.50
Cost of the 5 items (1.20 each)6.00

Account	Debit (AED)	Credit (AED)	Why
4100Sales Returns and Allowances	10.50		Income given back
1100Accounts Receivable		10.50	The customer owes 10.50 less
1200Inventory	6.00		The items are back in your stock
5000Cost of Goods Sold		6.00	The cost of that sale is reduced
Total	16.50	16.50	Balanced

Here the company registered for VAT after the invoice was made, and the credit note is dated after that. It still has no VAT, because the invoice had none.

Rules that apply to every credit note

The invoice decides the amounts. A credit note repeats the invoice line’s price, discount and VAT rate. It does not use today’s price or VAT status. If the invoice had VAT, the credit note reverses exactly that VAT, even if the company has since stopped being VAT registered. If the invoice had none, the credit note has none.
Part of a line. The amounts are shared out in proportion to the quantity. The last credit on a line takes whatever is left, so all the credit notes on a line add up to exactly the invoice line.
Stock cost. Goods that go back in stock are valued at the cost the invoice recorded for them, not at today’s average cost. They go back to the stock location the invoice took them from, on the Return date.
Bundles. A bundle is credited as one line. Its items go back in stock through their own stock entry.
Round-off. Only the credit note that completes the invoice gives back its round-off. A part return carries none. One exception: if the invoice was rounded down and a part return would be more than what is left to credit, the app takes the difference off that return.
VAT period. The VAT counts in the VAT period of the Return date.
Archived customers and items. You can still credit an invoice after the customer or an item was archived.

When the invoice was already paid

A credit note first lowers what the customer still owes on the invoice. Only the part above that is taken from the payments. That part is moved into a customer advance in the same step. No cash, card or bank money is paid out.

Example: an invoice of 100.00 plus 5.00 VAT	Amount
Invoice total	105.00
Paid so far	60.00
Still owed	45.00
Credit note for the whole invoice	105.00
Taken off what the customer owes	45.00
Moved from payments to customer advance	60.00
Money paid out to the customer	0.00

If the invoice was paid in full, the customer then owes nothing and holds the whole credit note as an advance.

For the amount moved, the app makes a second journal entry, dated today: Accounts Receivable is debited and Customer Deposits is credited. The payment’s own entry stays as it was. The review shows how much “becomes customer advance”. The invoice later shows “Moved to customer advance” beside the credit note.

To give the money back, open the customer and use Pay back customer advance. To use it against another invoice, use Use customer advance. Both are on the customer’s page. See Customers.

Where it shows up

Place	What changes
The invoice	It shows Part credited or Fully credited. The credit note is listed under “Credit notes”, the Returned column fills in, and what is owed goes down
Sales › Credit notes	A new row with the number, customer, invoice, reason, total and status. You can search by credit note, invoice, customer, reference or reason
Customer statement and balance	The credit note lowers what the customer owes. Any amount above that shows as customer advance
Customer aging report	The credit note appears in the “Credit notes” column
Day book	One entry for the credit note. The day’s sales total is net of the return
Sales and Items sold reports	The return is counted against the sale
VAT return (Detailed Reports › Tax)	The VAT is taken off your output VAT for the period of the Return date, linked to the invoice’s VAT
Profit and loss	Sales Returns and Allowances reduces your profit. Cost of Goods Sold falls for goods that came back
Balance sheet	Accounts Receivable, Inventory and Output Tax Payable. Customer Deposits when paid money became an advance
Stock reports	A sale return movement at the invoice’s stock location, with the credit note number

What the app blocks

These checks happen before anything is saved. A refused return leaves no half-written records and does not use up a credit note number.

Situation	What you see
No item chosen	Choose at least one item to return.
More than what is left	Only ‹n› left to return. or Nothing is left to return on this line.
Quantity is not a number, or is zero	Enter a quantity, for example 2. or Enter a quantity above zero, or clear the field.
Too many decimal places for the unit	‹unit› accepts whole-number quantities only. or ‹unit› accepts at most ‹n› decimal places.
“Some back in stock…” with no number, or too many	Enter how many go back in stock. or Only ‹n› are being returned.
No reason	Choose a reason for the return., Describe the reason for the return. or Enter at least 3 characters.
Return date before the invoice	Choose ‹date› or a later date.
Return date after today	Choose today or an earlier date in the company time zone.
Return date in a locked period	The accounting period is locked through ‹date›. Choose a later date, or ask an administrator to reopen the period.
Return date in a finalised VAT return	This tax point is in a finalised VAT return. Record a later-period correction.
Goods going back, box not ticked	Tick to confirm the items going back into stock have arrived and can be sold again.
Someone returned the same items after you opened the invoice	Some of these items were already returned. Check the quantities, then review the return again.
A quantity too small to give an amount	Increase the selected return quantity so it produces an accounting amount.
Paid money cannot be moved to customer advance	This paid excess is not covered by a releasable customer receipt. Review linked advances or reversed or archived receipts before confirming this return.
Paid money must move today, and today is in a locked period	The paid portion must move to customer advance using a journal dated today, but today is in a closed accounting period. Ask an administrator to reopen the period before completing this return.
The invoice has a Pay by link payment that the credit would release	This invoice has a ‹provider› Pay by link payment (‹number›) that this change would release. Delete the Pay by link payment (Payments received › open the payment › Delete receipt), change the invoice, then enter the payment again.
Every line is already credited	Every line on this invoice is fully credited. No new return can be recorded from it.
The invoice is a replacement invoice	This replacement invoice cannot be corrected here. Open its original invoice and credit note, and ask someone who can correct invoices.
Another person changed the invoice while you worked	Credit note availability changed while posting. Review the latest invoice quantities and try again.
The amount changed since you reviewed it	The return no longer matches the amount still available. Reload the original document and check the quantities before retrying. No records were posted.
Your connection drops when you press Confirm return	We couldn’t confirm this. It may already be saved. Try again sends the same request, so it cannot be saved twice.
Anything else goes wrong while posting	The credit note could not be posted safely. No accounting or stock records were created.

Notes that do not stop you

When paid money will become a customer advance, the review says: “‹amount› becomes customer advance. No cash is refunded here.”
Under the items the app reminds you: “Only items marked Back in stock are added to stock.”
When a stock item is marked Damaged or Not received, it is still credited. Its cost stays in Cost of Goods Sold.

Who can do it

Action	Admin	Manager	Cashier
See the Credit notes list and open a credit note	Yes	Yes	No
Make a credit note (Return, New credit note)	Yes	Yes	No, cashiers return goods at the till
Print a credit note	Yes	Yes	No
Edit a credit note	Yes	Yes	No
Delete a credit note	Yes	No	No
Edit a credit note so that it releases a customer advance that was applied to the invoice	Yes	No	No
Pay back a customer advance	Yes	Yes	No

These are the standard roles. Your administrator can give a custom role each action separately in Settings › Users & access.

Fixing a mistake

You have not pressed Confirm return yet. Press Back to change the items, or Cancel. Nothing is posted.
A posted credit note has the wrong quantity, date, reference or notes. Open it and choose Edit credit note.
- The credit note keeps its number and its journal entry. The entry is restated on the new Return date.
- You review the changes and the effect, then give a reason. The change history keeps the before and after.
- If you make the credit larger than the customer still owes, the paid extra becomes customer advance. Only an administrator can do this when the invoice was paid with a customer advance.
- If you lower the quantity of goods that went back in stock, the app refuses when those goods have been sold or moved since.
- The table below shows when the buttons are not offered.
The credit note should never have been made. An admin opens it and chooses Delete credit note, then gives a reason.
- Its journal entry, stock movement and VAT are removed. What the invoice owes goes back up.
- The number stays, shown as Deleted, and is never used again. A deleted credit note cannot be printed.
- A deleted credit note no longer blocks the invoice. Edit bill and Cancel erroneous sale work again on it, if nothing else blocks them.
- Managers do not see Delete credit note.
You forgot an item. Make another credit note for the quantities that are still left. Choose Return again.
The customer wants the money back. The credit note does not pay it. Use Pay back customer advance on the customer’s page.

When Edit credit note and Delete credit note are not allowed

The credit note shows the reason in place of the buttons. You may see:

Situation	What you see
The credit note moved paid money into customer advance	This return moved paid receipt money into customer advance. Its credit note cannot be edited or deleted until that transfer has a governed reversal.
It belongs to a return made at the till	This credit note belongs to a POS return. Change or delete it from that return.
Its date is in a locked period	Locked period — locked through ‹date›.
It is in a VAT return with locked figures	This is in your filed VAT return for ‹from› to ‹to›, so it can’t be changed or deleted. Correct or cancel it with an entry dated today. The correction goes into your next VAT return. Administrators can do this, and managers whose role allows it.
It already has a linked replacement tax invoice	This credit note has a linked replacement tax invoice and keeps its current correction path.
The goods it put back in stock have been sold or moved	Some of this stock has already been sold or moved. You can still change other details, or adjust the stock instead.
A manager edits so that a customer advance applied to the invoice would be released	This edit would release a customer advance application applied to the original invoice. Only an administrator can do that – ask an administrator to make this change, or unapply it from the receipt screen first.
Someone else changed the credit note first	This credit note was changed by someone else. Reload it to see the latest version.
It was already deleted	This credit note was deleted.