Sales returns and credit notes

A sales return — printed as a credit note — reduces what a customer owes after an invoice was sent: goods came back, the price was too high, or a service was not delivered. Confirming it reverses the revenue and tax; paying the money back is a separate refund step, so the credit can instead be kept against future invoices.

Create a return

1. Open Sales → Sales Returns and select Create Return.
2. Pick the customer and, if the return relates to a specific invoice, the original invoice — its lines are offered so you can pick what came back.
3. Add or adjust lines: item or description, quantity, unit price and tax.
4. Enter a reason (printed on the credit note) and notes.
5. Select Save as Draft to review later, or Save & Confirm.

Rules:

• The total of all confirmed returns against one invoice cannot exceed the invoice total.
• Returns cannot be created against Void or Written Off invoices.
• A return without an original invoice is allowed — for example a goodwill credit.

Confirm

Confirming makes the credit note final and posts it. A confirmed return reduces the customer’s balance immediately.

Accounting effect

Debit 4000 Sales Revenue (net) · Debit 2100 VAT Payable (tax) · Credit 1100 Accounts Receivable (total). If the original invoice carried a discount, the discount share is reversed with a credit to 4200 Discount Given.

Refund or keep the credit

• Refund — select Refund on the credit note, enter the amount, date, method and the cash or bank account. The status becomes Partially Refunded or Refunded.

Accounting effect

Debit 1100 Accounts Receivable · Credit 1200 Cash or 1210 Bank for the amount refunded.

• Apply the credit — leave it unrefunded. When you next record a payment for that customer, the unapplied credit is offered to net against open invoices; see Payments received.

Void a return

A confirmed return that was a mistake can be voided (permission salesReturns.void), which reverses its entry. A return that has been refunded must have the refund corrected first.

Saudi Arabia

Credit notes are e-invoicing documents: they are signed and submitted to ZATCA when confirmed, and they must reference the original invoice. See Saudi Arabia.

Statuses

Draft → Confirmed → Partially Refunded → Refunded; Void at any point after confirmation.

Related

Invoice statuses, void and write-off

Purchase returns and debit notes