Credit Notes (Sales Returns)

Handle product returns and issue credits to customers.

Interface Overview

Business Overview

A Credit Note is issued when a customer returns goods or when you agree to reduce their balance after an invoice has been posted. This is the professional way to reverse sales.

Actions

Creating a Credit Note

1. Go to Sales > Credit Notes.
2. Click Add Credit Note.
3. Source Invoice: (Optional) Select the original Invoice this relates to.
4. Items: Add the returned items.
5. Restock Checkbox: ⚠️ CRITICAL FOR INVENTORY
   • CHECKED (Default): Items are added back to inventory stock. Inventory account is debited (increases inventory value). COGS account is credited (reverses cost of goods sold). Use this for normal returns where items will be resold.
   • UNCHECKED: Items are NOT added back to inventory. No inventory accounting entries created. Only Sales Returns and Accounts Receivable accounts affected. Use this for damaged returns, write-offs, or when items shouldn't be restocked.
6. Refunding: Toggle "Record as Cash Refund" if you are paying the customer back instantly.
7. Click Save & Post.
8. Effect: Reduces the Customer's balance and (if Restock is checked) increases your Inventory.

Viewing & Printing

• Review all returns in the Credit Notes List.
• Send a PDF copy to the customer as confirmation of their credit.

Editing & Voiding

Editing Credit Notes

• Draft Status: You can edit all fields including items, quantities, and the Restock checkbox when the credit note is in draft status.
• Posted Status: Once posted, credit notes become locked to maintain accounting integrity. You cannot edit a posted credit note directly.

Correcting Restock on Posted Credit Notes

If you need to change the Restock setting on a posted credit note:

1. Void the posted credit note - This reverses all accounting transactions and stock movements
2. Create a new credit note with the same details
3. Adjust the Restock checkbox as needed for each item line
4. Post the new credit note

This ensures a clean audit trail and maintains the integrity of your financial records.

[!NOTE] Draft Status: If the credit note is still in Draft status, you can simply click the Edit button to directly modify the Restock checkbox without voiding and recreating. The void/recreate process is only required for posted credit notes.

Voiding Credit Notes

• Void Action: If a Credit Note was issued by mistake, use the Void action to restore the customer's original balance.
• Effect: Voiding reverses all accounting entries created by the credit note, including inventory adjustments if Restock was checked.

[!IMPORTANT] Accounting Integrity: Never just "Delete" an Invoice if items were returned. Always use a Credit Note to maintain a clean audit trail for tax purposes.