Debit Note Journal Entry
Overview
The company may need to issue the debit note to its supplier when it needs to return the purchased goods for some reason. In this case, it needs to make a debit note journal entry to reflect the amount that should be debited in the company’s account.
Sometimes, the bank also uses the debit note to decrease the balance of the company’s bank account. For example, the bank may issue the debit note to charge against the company’s account as the fee of handling the NSF check. In this case, the balance of the company’s bank account will decrease by the charged amount.
Debit note journal entry
The company can make the debit note journal entry when it returns the goods back to the supplier by debiting the accounts payable and crediting the inventory account if it uses the perpetual inventory system.
| Account | Debit | Credit |
|---|---|---|
| Accounts payable | 000 | |
| Inventory | 000 |
In this journal entry, both liability (accounts payable) and asset (inventory) decrease in the same amount.
On the other hand, if the company uses the periodic inventory system, the debit note journal entry for returning goods back to the supplier will be as below instead.
| Account | Debit | Credit |
|---|---|---|
| Accounts payable | 000 | |
| Purchase returns and allowances | 000 |
Debit note example
For example, on June 01, the company ABC issues a debit note to its supplier to return the $1,000 goods that it purchased on credit previously. The company ABC uses the perpetual inventory system to account for all inventory-related transactions.
In this case, the company ABC can make the journal entry for the debit note of $1,000 goods returned as below:
| Account | Debit | Credit |
|---|---|---|
| Accounts payable | 1,000 | |
| Inventory | 1,000 |
It is useful to note that the supplier may also send the debit note to its customer if the issued invoice contains the amount that is undercharged for some reason. In this case, the accounts payable of the company as a buyer will increase instead to reflect the debit note it receives from the supplier. Though, in most cases, the supplier tends to issue a new invoice to replace the old one instead.