Using supplier credit notes

Applies to : Office Accounting Express, Professional

Just like you can issue a credit note to a customer, the supplier can issue you a credit note, either for returned products, or as a reduction in your balance with the supplier.


Sample Supplier Credit note
You should note the following about a supplier credit note:
  • A supplier credit note can be created either from a blank template or from a purchase invoice. If the credit note is created from a purchase invoice, it will contain all the products on the purchase invoice.
  • As the credit note is a reverse purchase invoice, it will remove any stock products on the credit note from stock and return them to the supplier.
  • A credit note that reduces the balance should contain a nominal account rather than products.
  • A credit note immediately reduces the supplier balance.
  • If a supplier credit note is created from a purchase invoice, it is automatically settled against that purchase invoice. If it is created from a blank template, it must be settled against one or more purchase invoices using the Pay Purchase invoices worksheet.
  • When the Show prices with VAT checkbox is checked, all amounts are treated as being VAT-inclusive (if the supplier lists their prices with VAT).

Supplier Credit note Postings

The supplier credit note updates the purchase ledger and stock (when applicable) the moment it is saved.

The supplier credit note will:
  • Credit the expense accounts with the amounts on the lines
  • Credit the purchase/input VAT account with the VAT
  • Debit the purchase ledger account with the total on the supplier credit note

If the supplier credit note contains stock products (Office Accounting Professional and Professional Plus) the supplier credit note will:
  • Credit the stock asset account with the quantity and cost of the products
  • Credit the purchase/input VAT account with the VAT
  • Debit the cost of sales account with the cost of the products
  • Debit the purchase ledger account with the total on the supplier credit note
  • Credit the cost of sales with the total net of VAT

Although this seems a little strange at first, remember that you are basically selling the products back to the supplier, so this is basically an invoice to the supplier where the FIFO principle determines the cost of the products. In most cases the credit and debit of the products are identical, but not in the cases where some products have been sold, so the products returned to the supplier differ from the products received.

The Products and Stock Management module explains stock and the FIFO principle in more detail.

The audit trail for a supplier credit note will typically look as follows if the supplier credit note contains stock products: