Debit Note
A Debit Note is a note sent by the buyer (you) to the supplier to document that goods are being returned (or the amount is being debited) against a pre-existing Purchase Invoice. It essentially reverses (in part or full) the transaction documented by the Purchase Invoice.
In ERPNext, the Debit Note is employed interchangeably with the term Purchase Return while making adjustments in accounting and stock for returned items.
1. Creating a Debit Note (against purchase invoice)
You have two primary options:
A. From the Purchase Invoice (recommended)
- Open the submitted Purchase Invoice for which you are returning goods.
- Click "Create → Return / Debit Note" (this will create a new Debit Note document pre-filled).
- Supplier, Items, Taxes, Rates, and others are copied from the original invoice. You would only need to modify the quantities (to the ones being returned), amount (if partial return), remarks, etc.
- If payment was already done (partially or fully), you need to record a Payment Entry against the initial Purchase Invoice in order to show the refund or adjustment.
- Save and Submit the Debit Note.
When submitted, system will reverse accounting effects of the initial invoice (for returned lines) and update the Supplier account / outstanding accordingly.
B. Create a Debit Note directly (without reference)
You may also start a fresh Debit Note (Purchase Return) document directly (without "Create from" the invoice), and enter Supplier, Items, amounts, taxes, etc. manually. ERPNext will account for it in the same way (i.e. reverse the purchase expense / payables) when submitted. But it's better to use the "Create from Invoice" path for traceability and uniformity.
2. How Debit Note Affects Ledger & Accounting
- The Debit Note unravels (in whole or part) the accounting postings made by the initial Purchase Invoice.
- The Supplier's account (Accounts Payable) is decreased (i.e. you "owe less" since you've returned goods).
- The purchase cost or stock/inventory accounts are realigned accordingly (subject to your accounting configuration and whether you track stock).
- If already paid, the Payment Entry you make will result in a negative balance or refund in Supplier account to clear the return.
- Post Debit Note, if you see the original Purchase Invoice status, you might notice it indicated as "Debit Note Issued" or "Return" status.
In short: the Debit Note reverses (to the value of returned goods) the purchase transaction in your books.
3. No Payment Made / Part Return
If you never paid for the initial Purchase Invoice, and you return everything, the easiest route is to cancel the Purchase Invoice. But in most situations, you return part only, or cancellation is not allowed (accounting regulations). In such a situation, employing a Debit Note is the proper means of adjusting the ledger for returned stock.
In a part return, you post only the returned amounts / quantities in the Debit Note and hence the invoice continues to exist for the balance part.
4. Example
You had bought Cotton worth Rs 2400 plus taxes from Supplier Blue Mills. When delivered, you realized that the goods were damaged. You returned the goods, and thus a Debit Note will be created.
To achieve this in ERPNext, navigate to the Purchase Invoice prepared for this transaction. Click on Create → Return / Debit Note. Automatically, the item and supplier details are picked up. Modify the quantity of the item to the quantity of goods being returned. Specify the reason for return, for instance "Damaged goods."
If you had already settled the supplier in whole or in part for the initial Purchase Invoice, you must make a Payment Entry to offset the refund or credit. Once the Debit Note is saved and submitted, the system will reverse the recorded expense or inventory, and decrease the outstanding payable to the supplier.