What is a credit note? Definition

In the financial sector, there are many terms for operations. One of them is a credit note. This tool is used in transactions between suppliers and buyers in international trade. Organizations that are building a business not only in Russia, but also abroad, should understand what a credit note is.

The essence of the term

Enhanced trade links foster the use of new tools. One of them is a credit note. What are these simple words? In international trade, this is the name of the settlement document that the supplier writes to the buyer, providing the latter with a certain amount of funds on credit. Let's try to break this term into pieces.

A credit note is a notice, an act issued by the supplier in the event of a change in customer debt. The document receives legal force only upon the occurrence of certain circumstances prescribed in the contract, and is used when changing the initial conditions of the transaction.

Signs

• It is issued in any form. Legislatively a sample of a credit note is not approved. Also in the regulatory documents there are no requirements for its preparation.
• There is a bilateral agreement of the transaction. The possibility of completing this document is prescribed in advance in the supply contract.
• One-way clearance. The document takes effect as soon as the seller draws it up and sends it to the supplier.
• This document draws up discounts that will be provided some time after shipment.

Application

Suppliers use a credit note to increase customer motivation by:

• Providing discounts to dealers. At the same time, the conditions under which the document comes into force should be spelled out in the contract. Most often, the minimum consignment of goods that the client must redeem for a certain period of time is indicated - a month, a quarter or a year.
• Settlement of settlements between the parties. For example, the contract may include a clause on the supplier covering the unforeseen expenses of the buyer.
• Simplify product return procedures.

Consider each of these methods in more detail.

Discounts

A credit note is a great way to get a discount. In this case, the dealer will be able to purchase more products, and the manufacturer will be able to increase output. A significant advantage of this scheme is that the buyers cannot dump each other, because they do not know whether they will fulfill the plan and whether they will receive a discount. In this case, the credit note is considered as an additional bonus that the buyer can receive after fulfilling the terms of the contract. In such situations, the credit note is not reflected in accounting. To fix it, extra. agreement.

Example

According to the results of the quarter, the supplier provides a discount in the form of a credit note to customers. To get a bonus, you need to purchase goods worth at least 20 million rubles. In this case, a 3% discount is charged. One of the buyers for the quarter purchased products worth 22 million rubles. Accordingly, the supplier wrote him a credit note for 660 thousand rubles.

Mutual settlements

A credit note is a tool to pay off counter obligations to a customer. The supplier can pay for unforeseen, additional and costs of returning defective products:

• transferring money to the buyer;
• by issuing an act of netting;
• issuing a credit note.

Danger

In domestic practice, the latter method is rarely used, since the tax service may not accept this document to pay off counter obligations with VAT and will consider the operation “debt forgiveness”. This term is interpreted in Art. 415 of the Civil Code, Letter of the Ministry of Finance No. 02-3-08 / 84 of July 25, 2002

Problems using a credit note may arise if:

• the contract does not state that the discount is provided by reducing the initial cost of production;
• primary documents are made without discounts;
• notice of the discount was issued a certificate, a report.

That is, the possibility of calculating the discount should be prescribed in the original contract.

Legislative regulation

When paying an advance to a non-resident supplier, there are no problems. After all, payment was made before delivery, we are not talking about defects in the goods. The Bank removes this operation from control at the time of import of products after receiving relevant information about the operation. The fact of processing a credit note will be recorded after deregistration.

The situation is different if there is a partial payment for the goods. After providing a credit note, the currency control will engage in the verification of the transaction. In this case, the amount of debt to the supplier, which is already registered, will decrease. Unfortunately, there are no clear legislation to regulate this process.

Accounting Reflection

In BU, the amount of the discount provided reduces the seller’s debt, the contract price does not change. This part of accounts payable is included in non-operating income. This operation is reflected in accounting by the following posting: 60 91-1. The VAT on previously purchased goods upon receipt of a discount is subject to recovery. To do this, the wiring is used in the balance: DT19 KT68. The amount of tax deducted is recognized in other expenses for tax purposes. Most likely, the legality of VAT recovery will have to be defended in court.

At buyer

Algorithms for recording transactions with a buyer in a control unit depend on:

• the fact of the sale of goods;
• shipping time (current or previous year).

The table below shows the postings for the accounting of the credit note by the buyer.

At the seller

After issuing a credit note, the seller should:

• reissue primary documents and invoice;
• adjust revenue: using the cancellation method (if the shipment was in the current year), reflect the discount amount in other expenses (if the shipment was in the past year);
• check the presentation of the document for compliance with the requirements of Art. 252 Tax Code (economically substantiate, confirm with documents).

If the buyer has already fully paid for the goods for which the discount is granted, the seller may not return the funds, but take them into account as an advance for future deliveries.

Return defective products

If the buyer has already obtained ownership of the goods, he needs:

• draw up an act to fix the shortcomings of the goods;
• make a claim to the seller;
• reflect the return of defective products;
• reduce revenue;
• adjust the amount of VAT.

The buyer needs to prepare a full package of documents to justify the implementation with zero profitability.

Conclusion

Accounting for a credit note in domestic practice has not yet been adjusted. Therefore, to arrange settlements with counterparties within the party, you should always use standard accounting documents. If it is not possible to arrange international economic operations without a credit note, then the possibility of using this instrument should be prescribed in the contract. After the formation of the credit note, the supplier and the buyer must make the appropriate entries in the accounting records and redo the receipt documents, in particular the invoice.