Credit note what is this? Definition

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2019-06-24 09:00:28

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In the financial sector there are many terms to denote the operations. One of them is a credit note. This tool is used in transactions between suppliers and buyers in international trade. Organizations that build business not only in Russia but also abroad, it should be understood that such a credit note.

The Essence of the term

The Expansion of trade relations promotes the use of new tools. One of them is a credit note. What is it in simple words? In international trade, the so-called settlement document, which the supplier issues to the buyer, giving the latter a certain amount of money on credit. Let's try to break the term into parts.

Bank card

The Credit note is a notice, certificate, issued by the supplier in the event of a change of the client's debt. Document obtains legal force only upon the occurrence of certain circumstances spelled out in the contract, and is used to modify the original terms of the transaction.

Characteristics

  • Issued in any form. Legally sample credit notes not approved. Also in the regulations there is no requirement to report.
  • There Is two-way negotiation of the transaction. The possibility of registration of this document as specified in the supply agreement.
  • Single-sided design. The document comes into force as soon as the seller will compose it and send to the provider.
  • According to the document issued discounts that will be provided shortly after shipment.

Usage

Providers use the credit note to increase the motivation of the buyer by:

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  • Discounts to dealers. In this case the contract should be spelled out the conditions under which the document takes effect. Most often, you specify the minimum quantity of goods that the customer may redeem for a certain period of time – month, quarter, or year.
  • Settlement of accounts between the parties. For example, the contract may be prescribed item on the coating supplier contingencies of the buyer.
  • Simplification of procedure of return of the product.
credit memo simple words

Let's Consider each of these methods in more detail.

Discounts

The Credit note is a great way to get discounts. The dealer will be able to buy more and more products, and the manufacturer - to increase the volume of production. A significant advantage of this scheme is that the buyers are not unable to dump because they don't know whether the plan will receive the discount. In this case, the credit note is considered as an added bonus that the buyer can receive after fulfilling the conditions of the contract. In such situations, a credit note in accounting is not reflected. Its fixation is made additional agreement.

credit memo accounting

Example

The Provider by the end of the quarter offers a discount in the form of credit notes to customers. To get the bonus, you need to buy goods worth at least 20 million rubles. In this case, gets 3 % discount. One of the buyers over the quarter acquired products to 22 million rubles, Respectively, the provider gave him a credit note for 660 thousand.

loan note sample

Settlements

The Credit note is an instrument for the repayment of reciprocal obligations to the buyer. To pay for unanticipated, additional costs of return of defective products, the supplier may:

  • Transferring money to the buyer;
  • Make an act netting;
  • Putting the credit note.

Danger

In domestic practice, the latter method is rarely used because the IRS may not accept this document for the repayment of obligations including VAT and will consider the operation “debt forgiveness". So interpreted the term in article 415 of the civil code, the Ministry of Finance Letter No. 02-3-08/84 25.07.2002

The Problem with using credit notes can occur if:

  • The contract does not stipulate that discount by reducing the initial cost of production;
  • Primary documents drawn up without the discount;
  • Notification about a discount has been issued a certificate by the report.

There is a possibility of discounting needs to be spelled out in the original contract.

credit memo account

Legislative control

When you pay the advances to suppliers non-resident is not a problem. Because payment is made before delivery, the defects are not talking. Bank this operation removes the control at the time of importation of the products after obtaining the relevant information about the operation. The fact of registration of the credit note will be recorded after deregistration.

This is not the situation if there is a partial payment for the goods. After submitting a credit note, exchange controls would verify the transaction. In this case reduced the amount owed to the supplier, which have already been registered. Unfortunately, a clear legislation on the regulation of this process do not exist.

Reflection inaccounting

TO BA the amount of discount granted reduces the debt of the seller, the contract price is not changed. This part of the payables included in non-operating income. This operation is reflected in the accounting the following posting: ДТ60 КТ91-1. VAT on previously purchased products when discount is to be restored. To this end, the balance is used wiring: ДТ19 КТ68. The amount of the tax is reflected in other expenses for tax purposes. Most likely, the validity of the VAT recovery will have to defend in court.

credit memo currency control

The buyer

The Algorithms account for transactions from the buyer to BA depends on:

  • The existence of any fact of sale of goods;
  • Time of shipping (current or previous year).

The following table displays the transactions for the account of credit notes by the purchaser.

Actual implementation Elimination of debt Adjustment of VAT
Shipment is not made ДТ41 КТ60 ДТ19 КТ60 - reversal ДТ68 КТ19 - recovery
The product implemented in the reporting period ДТ90-2 КТ41 - cost adjustment; ДТ41 КТ60 — the adjustment of debt
The Goods shipped in the past year ДТ60 КТ91,1 - reduction of debt owed to supplier ДТ91-2 КТ68

The seller

The Seller after issuing a credit note should:

  • Re-register the original documents and invoice.
  • Adjusted net profit: method of reversal (when the shipment was held this year), to reflect the discount amount in the other expenses (if the shipment was held last year);
  • Check the setting of the document on conformity to requirements of article 252 NK (economically justified, documented).

If the buyer already paid for the product on which discount, the seller may not return the funds, and to take them into account as advance payment for future delivery.

credit memo

Return defective products

If the buyer already has the right of ownership of the goods he needs:

  • Make a plan for fixing the defects;
  • Raise claim to the seller;
  • To reflect the return of defective products;
  • A reduction of revenue;
  • To adjust the VAT amount.

The Buyer need to prepare full package of documents to justify the implementation of zero profitability.

Conclusion

The post credit notes in domestic practice has not yet adjusted. Therefore, for the registration of mutual settlements with counterparties inside the side, you should always use a standard accounting documents. If no credit note is not obtained to issue international economic transactions, it is necessary to prescribe in the contract the possibility of using this tool. After the formation of the credit note the supplier and the buyer must conduct accounting relevant posting and alter the credit documents, particularly the invoice.


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Alin Trodden - author of the article, editor
"Hi, I'm Alin Trodden. I write texts, read books, and look for impressions. And I'm not bad at telling you about it. I am always happy to participate in interesting projects."

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