Customer Credit Note and Sales Return

A Sales Credit Note is an official document issued when a customer returns goods or when an adjustment is needed for a previously issued invoice. It serves as a proper record for both the seller and the customer to maintain accurate accounting and tax records for the sale and return. To create a credit note, navigate to Sales > New > Customer Credit Note.

Customer
A customer is required to create a credit note. User can select a customer from the existing list, which displays recent and frequently transacted customers. If the customer does not exist, user can add a new one by clicking the + button next to the dropdown.

Customer Branch
A single customer can have multiple branches representing specific locations or divisions. This allows user to manage returns and credits separately for each branch under one main customer account.

Transaction Reference
The reference field uniquely identifies each credit note. The system allows user to define and modify the serial pattern in Setup -> Transaction Reference. This value can be edited manually while maintaining a consistent numbering pattern.

Sales Type
It is a drop down having multiple price lists, such as Retail for end customers and Wholesale for B2B customers. Based on the tax inclusion setting of the selected sales type, prices in the line items will be shown as "Price after tax" (tax included) or "Price before tax" (tax not included). User can also create a new sales type directly from this page by clicking the + icon next to the dropdown.

Shipping Company
The Shipping Company field is used to specify the logistics or transport provider responsible for delivering the goods to the customer. This helps track which courier or shipping service is handling the delivery and can be used for tracking purposes.

Price List / Sales Lists
This dropdown allows user to select from multiple price lists, such as Retail or Wholesale. Based on the tax setting, prices will appear as "Price after tax" or "Price before tax". New sales types can be created by clicking the + icon.

Customer Discount
This field displays the predefined discount percentage assigned to the selected customer. The system automatically applies this rate to the transaction to ensure consistent pricing based on the customer's specific profile or agreement.

Dates
The Date field represents the official financial date of the credit transaction. This date is used to calculate stock balances and financial records for that specific day.

Branches & Departments
These fields help organize business operations across different locations and internal functions.
  • Branches: Represents separate business units (e.g., in different cities). Enable this in Setup -> Preference -> Use Branches Only.
  • Departments: Refers to internal divisions like Sales or Accounts. Enable this in Setup -> Preference -> Use Branches and Departments.

Line Items
The product and services list will be provided to choose the particular item.
For each line item, the process is as follows:
  • Item Drop down: Select an item from the list. If the item has default values (like tax type or sales price), they will automatically populate the relevant fields. To add a new item on the fly, click the + icon next to the drop down. User can also edit the item's name from here.
  • Batch No: If the business handles items like medicines or FMCG products, user can enable batch and expiry date tracking. To enable this feature, go to Setup -> Company Setup and enable "Enable Batch System" (for batch numbers only). Here, user must manually enter the batch number into the text box for each line. This ensures the specific stock being sold is tracked accurately.
  • Expiry Date: If your business also need expiry date, you can access it in Setup -> Company Setup and enable "Enable Batch Number & Expiry Date System" (for both). A dedicated date cell is available for each item. You can select the date manually from the calendar to ensure the correct expiry information is recorded.
  • Quantity & Units: Enter the quantity being sold. The system supports multiple units for an item. For example, if an item is created with "meter" as the Primary Unit, user can sell it in "centimeter" if created in the item's unit mapping page, which is available on the Item's view page. Stock movement is always managed in the original stock unit.
  • Price Input: The default price is populated based on the selected sales type and location. A button at the start of the price box, when clicked, shows recent transactions for this item to help with pricing decisions. The price can be modified manually. User can add the default value in the Sales Price tab, which is available on the Item's view page. The selected Price List (Sales Type) determines how the price is displayed: if the sales type is tax-inclusive, the price shown is after tax; if tax-exclusive, the price shown is before tax.
    • Price After Tax: Displayed when the selected sales type is tax-inclusive. The price already includes tax.
    • Price Before Tax: Displayed when the selected sales type is tax-exclusive. This is the item price without tax.
  • Discount: User can apply a line discount. The discount can be entered as a percentage or a fixed amount. This behavior is set in Setup -> Preferences -> Use Amount Discount in Sales Line Discount.
  • Tax Type(Optional): Tax Type is a field that shows the tax value for the respective item. If "Allow Item Tax To Change" is enabled, this tax type shows as a dropdown and can be changed while creating an invoice. User can enable it from Setup -> Preferences -> Allow Item Tax To Change.
  • Add Item: Click the Add button to finalize the item and add it to the invoice table. Once added, user can edit or remove the line item as needed.
  • Edit Icon: After completing a line item, if user wants to change any input in that line, they can do so by clicking the Edit pencil icon displayed at the end of the line.
  • Remove Icon: To remove a line item, simply click the "X" (Delete) icon displayed at the end of the respective row in the line items table.

Insufficient Quantity Issue
The system prevents negative stock inventory to maintain proper stock movement and accounting accuracy. If the entered quantity results in a negative stock value, the system will block the entry and display the message: "Marked items have insufficient quantities in stock as on day of delivery."
This issue occurs due to the following factors:
  • Inventory Location: Stock may be available in a different warehouse. Check the Inventory Location dropdown to ensure the correct location is selected.
  • Transaction Date: Stock balance is calculated based on the specific date of the invoice. If the invoice is backdated, the system checks if sufficient stock was available on that specific day. User cannot invoice items that were not in stock at that time.

Allowing Negative Inventory
If the business workflow requires it, user can enable negative stock by navigating to Setup -> Preferences -> Allow Negative Inventory. Once enabled, user can proceed with invoices even if current stock levels are insufficient. Ensure user has a process in place to balance stock records afterward.

Quantity Management
In the ERP, a user can add the same item multiple times in the same invoice with different prices. In case a user needs to update that with the previous same line item on the invoice, the user can do it by enabling it from Setup -> Preferences -> Update Existing Line Item in Sales.

Total Details
Below the line items, user will find the invoice totals section.
  • Sub-total: The sum of all line item totals before additional charges or discounts.
  • Shipping Charges: An input field to add any shipping or delivery costs to the invoice.
  • Discount %: An input to apply a percentage-based discount to the overall invoice total.
  • Tax Details: This displays the total tax amount for the whole invoice. Here, the system provides an elaborate breakdown of the applied taxes (such as GST or VAT), displaying the tax percentage and the specific calculated tax amount.
  • Round Off/Discount: An input to adjust the final total for rounding purposes or to add a small fixed discount.
  • Update Button: Click this button to refresh the form and recalculate all totals after making changes.

Attachments
User can attach documents or images related to the transaction. This is useful for adding supporting documents like purchase orders, delivery receipts, signed contracts, or any other relevant files.
To add attachments:
  • Click the attachment icon or browse option in the invoice form.
  • Select the files user wants to upload from user computer.
  • The attached files will be saved with the invoice for future reference.

Credit Note Types
In our system, there are two ways to handle a Credit Note (Sales Return). The type user chooses depends on what happens to the physical stock.
Item Returns to Inventory
Use this when a customer returns a product that user can sell again.
  • Stock: The system automatically adds the items back into the warehouse.
  • Inventory: User Quantity On Hand (QOH) increases.
Items Written Off
Use this when a customer returns a product that is damaged, expired, or shouldn't be sold again. Here for this one user have to select Inventory Disposal/Write-Off Account on the next field, Inventory Disposal/Write-Off Account. This field only appears while Items Written Off
selected in the credit note type drop down.
  • Stock: The customer gets their money back (credit), but the stock is NOT added back to the warehouse.
  • Inventory: User Quantity On Hand (QOH) stays the same.

Items Returned to Location
This field specifies the warehouse or inventory site where the physical goods are being restocked. When a Credit Note is processed for physical items, the system automatically updates the stock levels for the selected location to reflect the return.

Comments
This Field Contains the reason of the credit note.

General Ledger (GL)
The General Ledger (GL) acts as the central record-keeping system for your company’s financial data, providing a complete record of every financial transaction. In the context of a Customer Credit Note, the GL tracks the reversal of revenue, the return of taxes, and the reduction in the amount owed by the customer.
These are the accounts maintained in a Credit Note:
  • Sales Account: This account is Debited to reverse the revenue previously recorded, reflecting the return of goods or services.
  • Receivables Account: This tracks the amount owed by the customer; it is Credited to reflect a decrease in the customer's outstanding balance.
  • Shipping & Freight Receivable: This account is Debited to reverse any delivery or freight charges that were originally charged to the customer.
  • Discounts Given: This account is Credited to reverse the impact of any sales discounts that were applied to the original transaction.
  • Tax Accounts (Output SGST / Output CGST): These liability accounts are Debited to reverse the tax previously collected, as that amount is no longer payable to the government due to the return.
  • Foreign Exchange Gain/Variation: This account is used to match the total amount when there is a minor difference between total debits and credits, ensuring the ledger remains balanced.
GL for physical items

For the physical items, our system maintains,

  • Inventory Account: This asset account tracks the total value of physical products currently held in the warehouse. It is Credited when items are sold or delivered, reflecting a reduction in the stock on hand.
  • C.O.G.S (Cost of Goods Sold) Account: This expense account records the original cost the company paid for the items that have now been sold to a customer. It is Debited during a sale to recognize the cost of the inventory that left the building.


Allocation from
The Allocation page allows user to link a Credit Note to specific outstanding transactions, such as Sales Invoices or Bank Payments, to reduce the customer's open balance. User can access this screen by clicking the Allocate action button from the Credit Note list or view page.The allocation table provides the following details for each record:
  • Transaction Type & Reference: Displays the type of document (e.g., Sales Invoice) and its unique reference number.
  • Date & Due Date: Shows when the transaction occurred and its official payment deadline.
  • Amount: The original total value of the transaction.
  • Other Allocations: Displays any amounts already allocated to this transaction from other sources.
  • Left to Allocate: The remaining balance on the transaction available to be covered by this Credit Note.
  • This Allocation: The specific amount from the current Credit Note being applied to the transaction.
  • All Button: Automatically fills the field with the maximum possible allocation amount.
  • None Button: Clears the allocation for that specific line.

Credit Note Report

The Credit Note Report page provides an organized view of all sales returns and credit adjustments from customers. User can generate these reports to analyze returns or print them as professional records in PDF or Excel formats.

How to Access

To access this section, user should go to Reports > Sales > Credit Notes. This allows user to filter and review credit note data over specific date range.

Customizing Invoice Templates

You can create new PDF templates or modify existing ones by navigating to the Reports Module -> Click "Editor" page can see on top right corner page. 

  • Modify Existing Templates: The user can modify any existing template to change colors, fonts, or layouts as they want.
  • Create Own Templates: The user can also create a customized template for every type of transaction. This ensures that the branding and details match the business requirements perfectly.
Report Filters

User can customize the report by using the filter panel on the right:

  • Template: Select the desired visual format, such as "Professional Credit Note".
  • Date: Define a specific date range to see credit notes recorded during that period.
  • Currency Filter: Filter the report by specific currencies, such as Indian Rupee (INR).
  • Email Customers: Choose whether to automatically trigger an email to the customer upon report generation.
  • Payment Link: Option to include or exclude payment links in the document.
  • Comments: Add personalized notes or messages to the printed report.
  • Customer: Filter the report for a specific customer or select "All Customers".
  • Orientation: Select Portrait or Landscape for the final printout.
Printing the Report

Once the filters and template are finalized, user can click the blue Print button at the top of the filter panel to generate the document.

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