What is Debit/ Credit Note:
As per definition debit note is a note (in prescribed format) sent by Purchaser of the goods, to inform the seller that his account has been debited.
Note: when goods are purchased we pass following entry:
Dr. Purchase A/c
Dr. VAT (on Purchases)
Cr. Creditor's A/c
While debit note is issued, It is informed to the Creditor that his account has been debited with Purchase Return and VAT on Credit (reversed).
Debit Note:
Similarly, the party who has sold the goods, shall issue a Credit Note (to inform the purchaser that his account has been debited).
See, what is the entry for sales?
Dr. Debtor's Account
Cr. Sales Account
Cr. VAT (On Sales)
If Credit Notes is issued, sales and VAT is to be debited and what is to be credited? (of course, Debtor's Account)
Not What does VAT Act says about this?
Rule 20 (1)
Details to be mentioned on Debit / Credit Note:
