How to Record Customer Credit Notes

Modified on Wed, Mar 18 at 2:09 PM

Overview:

Customer credit notes are issued to correct overbilling, process returns, or apply agreed-upon discounts. In QNE Cloud Accounting, recording a customer credit note properly ensures that customer balances are accurate, sales records are corrected, and financial statements reflect true values. This guide outlines the step-by-step process to help users confidently create credit notes and link them to original transactions where needed.

Scenario:

A customer reports that they were overcharged on a previously issued invoice due to a duplicated item. To correct the billing error, a credit note must be issued to reduce the receivable balance. This transaction will either offset an existing invoice or be used later against future billings.

Procedure:

Step 1: Navigate to Customer Credit Note Screen

Navigate to Accounts Receivable > Credit Notes.
Click Add to create a new customer credit note.

Step 2: Complete the Credit Note Header

Complete the following fields:

Customer Code – Select the customer for whom the credit applies.
Date – Set the transaction date (defaults to today).
Currency - Defaults to 1 for PHP. For foreign currency, manually enter the exchange rate.
Agent – Auto-fills from the customer profile; select manually if not pre-set.
Ref No. – Enter the invoice number or internal reference for traceability. (Optional)
Global Description - Enter the general reason for the credit (e.g., “Overbilling Adjustment”).
Project - (Optional) Select if the credit relates to a specific project.
Reason - State the specific cause of the credit note (e.g., Duplicate item on invoice).
Tax Inclusive - Tick if the credit amount already includes VAT. Leave unticked if not.

Step 3: Enter Customer Credit Notes Line Details

Under the line items section:

Account – Select the appropriate reversal account (e.g., Sales Returns and Allowances).
Account Name – Auto-fills based on the selected account.
Description – By default, mirrors the global description; edit if needed.
Ref No. - Optional; use for internal tracking or links to related documents.
Amount – Enter the amount to be credited.
Tax – Select the applicable VAT code, if any.
WTax – Select a withholding tax rate if necessary (optional).

Step 4: Go to Knockoff Tab and Match the appropriate Transaction

In the Knockoff Tab

Enable the checkbox under the Match column beside the invoice(s) to which the adjustment will apply.
Payment - Amount will auto-fill based on invoice balance, but you can edit this manually if the payment covers multiple invoices or is a partial payment.

Step 5: Confirm the Transaction

A confirmation prompt will appear:
“Create customer credit note success.”

Application:

Customer Prime Office Supplies was billed ₱15,000, but a duplicated item worth ₱3,000 was later identified.

Steps to issue a credit note:

Navigate to Credit Notes and click Add.
Select Prime Office Supplies.
Set the Date to July 15, 2025.
Global Description: Overbilling Adjustment.
Reason: Duplicate item billed on Invoice INV-1109.
Add a line item:
Account: Sales Returns and Allowances
Description: Adjustment for duplicated billing
Amount: ₱3,000
Tax Code: Vatable (12%)
Go to the Knockoff tab, match it to INV-1109, and apply ₱3,000.
Click Save.

The credit note is now linked to the invoice, and the customer’s balance is updated accordingly.