As a retailer engaged in the buy and sell industry, you regularly check the quality of merchandise in your inventory that is supplied to you. It is to make sure that none of the items sold are returned to you by your buyers. Until one day, while checking your inventory, you found out that the items that we’re supplied to you by consignment, by a longtime supplier are of low quality.
Thanks to your keen sense and ability to observe things, you found out about the problem before you sell them to the general public. You then called your supplier and informed him of the quality of the goods he delivered to you. The supplier then explained to you, in good faith, that he too is unaware of such while the goods were under in his custody. To settle the matter and not ruin the relationship you had with each other, both of you agreed to send each other a Debit and Credit Note Form and return the goods to the supplier.
What are Credit and Debit Forms?
Credit and Debit Note Forms are business forms issued or prepared by the buyer or the seller whenever an error in a transaction is made. These forms are issued separately by two separate parties, namely the buyer and the seller. A debit note form is a request sent by the buyer to the seller tso that a credit note will be sent to him, in return. On the otherhand, a credit form is issued by the seller to the buyer informing the former of an amount credited to him. Credit and Debit Note Forms are also issued in the event of a purchase return.
FREE 5+ Credit Debit Forms in XLS | MS Word
1. Debit Note Request Form
2. GST Debit Note Form
3. Credit Note Form Sample
4. Credit Note Request Form Sample
5. Credit Note Form Template
6. Credit Note Request Form
Purpose of Credit and Debit Forms
Credit and debit forms are two separate forms issued separately by the buyer and the seller alike. However, each of them has the same function, and that is the documentation of return of purchased goods. Return of goods or more commonly known as product return is the right of a buyer to return the purchased goods. The reasons for a product return vary from case to case, and, sellers have the right to refuse such a request if it doesn’t meet the terms and conditions of the return policy. The right to return a product is covered by the consumer protection law, which aims to protect consumers from unscrupulous sellers.
As mentioned, credit and debit forms are separate forms issued separately by the buyer and the seller. And, each of them has a specific purpose and function to the process of the return of goods. Written below are credit and debit notes and definitions for each form.
1. Credit Notes
The seller issues a credit note or a credit form by the time the buyer returns the goods. This is to indicate and acknowledge that the seller has received the goods subject for a return. These are recorded in a journal entry as a credit or expense.
2. Debit Notes
A buyer issues debit notes or debit forms at the time when there’s a need to return the goods to the seller. Doing so indicates that you were able to deliver the returned products successfully. After the seller has received the debit notes, the seller, in turn, will issue a credit note as an acknowledgment that goods to be returned are already accepted.
How to Make Credit and Debit Forms
Having agreed with the terms of the process of a product return, both of you also agreed to prepare credit and debit forms for each other. So that both of you can record the amount of the goods involved in the transaction in your accounting books. So here are the steps on how to make your credit and debit forms.
Step 1. Select a Credit and Debit Form Template
First off, select a credit or debit form template from a list of templates in this article. Credit and debit forms, as mentioned, are two different forms used in a single process. So you need to choose the right form according to the function that you’ll play in the process of a product return. After choosing, hit the download button beside the thumbnail so that you can proceed with editing it. It also helps to download the opposite form in anticipation that you’ll be the one issuing the opposite form in the future.
Step 2. Prepare Receipts and Invoices
Then, prepare the sales receipts and invoices for the transaction. These documents contain the transaction name and the amount involved that you’ll need in preparing a credit or debit form, as well as a journal entry for the accounting books. You can have those listed in a clean sheet of paper to speed up the process.
Step 3. Edit the Template of your Choice
After completing the previous steps, it is now time to edit the template that you choose from our list. First off, the template itself is already preformatted according to the purpose and function of the form to the process. And, all you need to is to type it the transaction name and the amount involved in the spaces intended for them. Make sure to write these details legibly and as accurate as possible.
Step 4. Print and Issue the Form
Next, print the form after editing it using your office and home printer. Print duplicate copies of the form as well. The duplicate of the form will be for records keeping purposes for this accounting period. Then, sign the form on the bottom part as an acknowledgment that such a document is legitimate. Lastly, issue the form to the seller after you returned the products, for which the seller would also issue a debit form as an acknowledgment of its receipt.
Step 5. Record the Transaction in your Ledgers
Record the transaction in its ledger account after the transaction is closed. This step is needed so that you can keep track of your business’s cash flow for this accounting period. It will also allow you to easily prepare your income statement at the end of the period by avoiding making adjustments to the amount and report discrepancies, as well.
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