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Credit Notes

This guide explains credit notes in MyCloudBook: crediting returned goods or a correction, with or without a document, applying the credit to an invoice, and the rules for changing and deleting a credit note.

Overview

A credit note records an amount that the company owes back to a customer: goods returned, a price corrected, or a service not delivered. It reduces the balance of the customer at once. The credit can then be applied to an open invoice of the customer, or paid back with a refund voucher.

A credit note can be made in two ways:

  • For an invoice or a receipt. The credit note takes the lines of the document, and only the quantities that come back are typed. The quantity of a line cannot exceed the quantity of the document.
  • Without a document. The lines are typed freely, as on an invoice.
PostAccount and amount
CreditAccounts Receivable, for the total of the credit note, with the customer as the contact of the post.
DebitThe sales account of each line (the sales account of the product, or the account of the line), for the line total.
DebitTax Payable, for each tax.
InventoryFor each returned inventory product: debit the inventory asset account and credit the cost of goods sold account, at the cost of the original sale. The quantity returns to stock.

Credit notes have their own number sequence.

How to open the screen

  1. In the left navigation, click Sales, then the Payments & Refunds tab.
  2. Click New Credit Note, or open a credit note with a double click.

For a credit note on a document, open the invoice or the receipt, click its Credit Notes tab, and click New Credit Note. The Receipt Vouchers guide describes the Payments & Refunds list.

The Credit Notes tab of receipt 15 with the New Credit Note button.
Figure 1. The Credit Notes tab of a receipt.
  1. 1New Credit Note. Opens a credit note for this document.
  2. 2The credit notes of this document.

The credit note screen

A new credit note with every button, field, column and total marked.
Figure 2. A new credit note without a document.
  1. 1Save.
  2. 2Save & Close.
  3. 3Close.
  4. 4Delete. Available after the save.
  5. 5The credit note number. 0 means the next number.
  6. 6Ref.
  7. 7Date.
  8. 8Customer. Required.
  9. 9Invoice to Refund. The invoice or the receipt that the credit note corrects. Optional.
  10. 10The total, in large figures.
  11. 11The tabs Items, Addresses, Credit Applied To, Related Documents, Attachments, and Notes.
  12. 12UPC/SKU search & add.
  13. 13Show Expenses Accounts. Shows the account column of the lines.
  14. 14Product / Service.
  15. 15Description.
  16. 16Tax.
  17. 17QTY.
  18. 18Unit Price.
  19. 19Line Total.
  20. 20The totals, with Applied Amount and Unapplied Amount.

The fields

FieldRequiredPurpose and rules
NoRequiredKeep 0 for the next number of the credit note sequence.
RefOptionalA free reference, for example the reason of the credit.
DateRequiredThe date of the credit note. It starts with today. The taxes use the rates of this date.
CustomerRequiredAn active customer. The credit reduces the balance of this customer.
Invoice to RefundOptionalThe invoice or the receipt that the credit note corrects. The selection loads its lines with the quantity 0. The document must belong to the same customer and use the same currency.
Product / ServiceOptionalWithout an invoice to refund: a product marked for sale, as on an invoice. With an invoice to refund: the lines come from the document and cannot be changed.
QTYRequiredThe quantity credited. A line with 0 is not saved. With an invoice to refund, the quantity cannot exceed the quantity of the document line.
Unit Price
Tax
Description		OptionalAs on an invoice. The description is limited to 4000 characters.
Expenses AccountOptionalShown with Show Expenses Accounts. The account of a line without a product. The list shows every account.

A credit note for a document

The example credits two sets of mugs that Harbor View Catering returned from receipt 15.

  1. Open receipt 15, click the Credit Notes tab, and click New Credit Note. The credit note opens with the customer, the receipt in Invoice to Refund, and the lines of the receipt with the quantity 0.
  2. Type 2 in the QTY of the mugs line, and a reference such as Two sets returned.
  3. Click Save. The credit note of 72.00 receives its number. The mugs return to stock, and the receipt shows the credit note in its Credit Notes tab.
A new credit note created from receipt 15 with the receipt line loaded with the quantity 0.
Figure 3. The credit note created from the receipt.
  1. 1The customer of the receipt.
  2. 2Invoice to Refund: the receipt.
  3. 3Load All Items from Receipt #15. Loads the lines of the document again.
  4. 4Open Receipt #15. Opens the document.
  5. 5Lines with a zero quantity are ignored.
  6. 6QTY starts with 0. Type the returned quantity.
The credit note with the quantity 2 and the total 72.00.
Figure 4. The returned quantity.
  1. 1The returned quantity.
  2. 2The total of the credit note.

The credited document is locked. An invoice that a credit note refunds cannot be changed or deleted while the credit note exists. To correct it, delete the credit note, change the invoice, and create the credit note again. The invoices list shows a red label, for example Credit Note #2: 72.00, under the status of the document.

Applying the credit to an invoice

The credit reduces the balance of the customer, but it does not reduce the amount due of a specific invoice until it is applied to that invoice.

  1. Open the saved credit note and click the Credit Applied To tab.
  2. Click Apply to Invoice. The window lists the invoices of the customer.
  3. Select the invoice in Apply to Invoice, check the Apply Date, type the Amount to Apply, and click Save.

The amount must be above zero, within the unapplied credit, and within the amount due of the invoice. The invoice then counts the credit in its received amount and lists it in its Payments tab.

The Apply Credit to Invoice window with the customer, the invoice 14, the apply date and the amount 36.
Figure 5. The Apply Credit to Invoice window.
  1. 1The window title.
  2. 2Customer.
  3. 3Apply to Invoice: the invoices of the customer, with their amount due.
  4. 4Apply Date.
  5. 5Amount to Apply.
  6. 6Save.
The Credit Applied To tab with invoice 14 and 36.00, Applied Amount 36.00 and Unapplied Amount 36.00.
Figure 6. The credit applied to invoice 14.
  1. 1Apply to Invoice, and the invoices that received the credit.
  2. 2Applied Amount.
  3. 3Unapplied Amount: the credit that can still be applied or refunded.

The row menu of an applied invoice offers Edit and Remove. Remove takes the credit back from the invoice. A refund voucher that uses the credit also appears in this tab; it can be changed only through the refund voucher.

The Credit Applied To tab with invoice 14 and refund voucher 1.
Figure 7. A credit note used by an invoice and by a refund voucher.
  1. 1The invoice and the refund voucher that used the credit.

Changing and deleting

A credit note can be changed after the save, with these limits: the currency cannot change while credit is applied, the total cannot become lower than the applied amount, and the customer must stay the customer of the applied documents. A credit note on an invoice in a completed project cannot be saved or deleted.

A credit note whose credit was applied or refunded cannot be deleted. Remove the applications in the Credit Applied To tab and delete the refund vouchers first. Deleting a credit note removes its journal entry and its inventory returns.

The message Cannot delete credit note that has been used.
Figure 8. A used credit note cannot be deleted.
  1. 1The message from the server.

Messages and their meaning

MessageCauseWhat to do
Some fields are not valid!A required field is empty, usually the customer.Fill in the field that is marked in red.
Credit note must contain at least one lineNo line has a quantity.Type a quantity in at least one line.
The quantity being returned for item 'X' exceeds the original quantity 'N'The quantity is larger than the quantity of the document line.Lower the quantity.
The 'Credit Note' and 'Refund invoice' must belong to the same customer.The document in Invoice to Refund belongs to another customer.Clear the Invoice to Refund, or select the customer of the document.
The credit note must use the same currency as the original invoiceThe currency differs from the document.Select the currency of the document.
The applied amount can not exceeds the remaining credit amount.The amount to apply is larger than the unapplied credit.Lower the amount.
The applied amount can not exceeds the unpaid amount.The amount to apply is larger than the amount due of the invoice.Lower the amount.
The invoice #N is already applied to the credit note #M. Please update the existing oneThe invoice already has an application of this credit note.Use Edit on the existing row.
Cannot delete credit note that has been used. ...The credit was applied or refunded.Remove the applications and delete the refund vouchers first.
This credit is consumed by Refund Voucher #N. Delete the refund voucher to release the credit.Remove on a refund voucher row.Delete the refund voucher.

Questions and answers

How do I give a customer credit for returned goods?

Open the invoice or the receipt, click the Credit Notes tab and New Credit Note. Type the returned quantity in each line and save. The goods return to stock and the balance of the customer falls.

Does a credit note reduce the amount due of the invoice?

The credit note reduces the balance of the customer at once. The amount due of a specific invoice falls when the credit is applied to that invoice in the Credit Applied To tab.

How do I pay the credit back to the customer?

Create a refund voucher for the customer. Load Available Credits lists the credit notes with unapplied credit.

Why can I not change an invoice after a credit note?

An invoice that a credit note refunds is locked. Delete the credit note, change the invoice, and create the credit note again.