Credit Note Template (Free Samples & Formats)

A credit note is a letter a supplier sends to their customer to correct a mistake in a purchase order or invoice. The same letter can be sent in a case where the supplier wants to make a refund to the client because of damaged goods or goods that didn’t meet the expectation of the customer.


We can also refer to this document as a credit memo. It acts as proof that the customer will pay less than what was highlighted in the invoice.

If you’ve difficulties in writing the letter, you can make your work easier by consulting samples/ templates.

How to write a credit note

A credit note is a common way of adjusting business accounts in cases where a wrong invoice is sent to a customer. The note is applicable in cases of damaged goods, overbilling, sending wrong products, short orders, writing off payments, or in post-invoice discounts.

The credit memo bears the same information as a sale invoice only that, it gives authority to the recipient to claim the indicated amount rather than request for payment.

A majority of accounting software used in today’s accounting have an option for generating a credit memo. Besides you can create one using a spreadsheet or a word processing app. After generating the credit note, you may opt to send it to the client via post or sent electronically via mail.

A typical credit note must contain the following basic information:

  • Customer’s number
  • Date of issue
  • Terms of payment
  • Contact details of both sender and receiver

Steps for writing a credit memo

  • Start by labeling the title of the document “credit memo” or “credit note.” Alternatively, you can use a template supplied by the accounting software or your office.
  • Type your business information at the top of the page. This information will include the business, name, contact information, address, tax identification number, website, and email. If you’re using a template, fill in the details in the appropriate spaces.
  • On the right side of the document, input the customer’s information. The customer’s identification number should feature in this position. If using a template, fill in the details appropriately.
  • The current date, the credit note’s number, and the original invoice number and terms of payment need to feature in the left side of the page, or the space provided in case of a template.
  • Divide the page into five columns and fill in the appropriate details as follow:
    • Quantity of the credited amounts
    • Item identification number
    • Reason for the credit
    • Price of each item
    • Multiply the price with the quantity of each item and indicate the total in the last column. Additionally, make sure you label each column with the appropriate title.
  • At the bottom of the table include a row for the subtotal credited amount. The row should be labeled “Subtotal.”
  • Include another row for the sales tax. You’ll get the sales tax for the credited items by multiplying your state’s sales tax by your subtotal. This row should be labeled “Sales Tax.”
  • The last row should feature the total amount arrived by adding the subtotal to the sales total.

Difference between a debit note and a credit note

  • Both debit and credit notes are essential documents that are exchanged between sellers and buyers during regular business transactions.
  • When a customer returns goods to their supplier, they’ll issue a debit note to show that a particular amount has been debited to the supplier.
  • At the same time, the supplier will issue a credit note to the customer to indicate they’ve received the goods. The credit note will inform the purchaser that a certain amount has been credited to their account after returning the goods.
  • A debit note is issued in a case where a buyer returns goods, their account is overcharged, or the buyer has undercharged the seller’s account. The note leads to a reduction in the receivables.
  • A credit note, on the other hand, is issued when the buyer receives returned goods; the seller’s account is overcharged by the buyer, or when the seller has undercharged a buyer. The note indicates a reduction in the accounts payable.

Different Credit Note Templates

Business credit note

A business credit note is a document that is exchanged between two businesses to correct errors in the invoice. This credit note must include:
  • The business name and contacts
  • Amount to be credited
  • Quantities of each item and their prices

Customer credit note

A customer credit note is a business document sent to a supplier to their customer to correct errors in an invoice. The note should include:
  • Original invoice number
  • Customer’s reference number
  • Suppliers information
  • Total amount to the credit

Sales credit note

A sales credit note is a document that a supplier sends to the client to correct errors in a purchase order or invoice. It should bear the following information:
  • Times to credit and their prices
  • Customer name and personal identification number
  • Amount to credit
  • Original invoice number

Credit note authorization form

A credit note authorization form is an internal document that authorizes the issuing of a credit note to a customer. It includes vital details, such as:
  • The date
  • Invoice number
  • Total amount to be credited
  • The account to be credited and the reason
  • Authorization signature sand designations

Credit note invoice

A credit note invoice is a document that a customer sends to a supplier to request for a refund if they have returned goods to the supplier or if they had been overcharged. It includes:
  • The customer’s name and reference number
  • Amount to refund
  • Quantities and prices of each item]
  • Official signature of the customer.