A credit note is the document that reduces what a party owes: it reverses all or part of a sales invoice, records goods a customer sent back, or records a credit a supplier owes you. It comes after the invoice or bill it corrects. When it is posted, xMatix books the reversal to the ledger and, when the note names its invoice or bill, applies it to that document's open balance.
Overview
One Credit Note record covers four kinds of credit. The Transaction Type field decides which one a note is, and that decides how it posts:
| Transaction Type | What the note is | Party | What posting books |
|---|---|---|---|
| (blank) | A financial credit note against a customer, for example a price correction or a full or partial credit of an invoice | Account (the customer) | Sales reversed, output tax reversed, receivable reduced |
| SaleReturn | A customer return of goods | Account (the customer) | The same entries as a financial credit note |
| BillReturn | A purchase credit: goods returned to a supplier, or a credit the supplier gives you | Supplier Account | Payable reduced, the purchase account and input tax reversed |
| Claim Settlement | A credit note raised for you by a trade-claim settlement | Account (the supplier the claim is made against) | The same entries as a financial credit note |
Credit notes live in the Finance app under Adjustments → Credit Notes, beside debit notes. Each note has lines, and the note's amounts are the totals of its lines.
When to use it
- An invoice is past its cancellation window, or it has been registered as an e-invoice, and it needs to be reduced or reversed. See Invoices.
- A customer returns goods, or is owed a credit for damaged, short or wrong goods.
- A supplier gives you a credit for goods you sent back or for a price difference on a bill.
Do not use a manual journal for these. A credit note keeps the correction linked to the invoice or bill and feeds the GST returns. See Working with journals.
How xMatix handles it
- Numbering. A new credit note is named from the CN series and each line from the CNL series. The Document Date is set to the day you create the note.
- Lines carry the money. The note's Amount is the sum of the line Amount values. Total Amount is the sum of the lines' gross amounts (amount plus tax, less discounts) plus any Round Off.
- Tax. A line is taxed from its tax group. On a SaleReturn or BillReturn note, a new line gets its tax group from your tax group rules and a unit price from your price lists (sale price lists for a SaleReturn note). Its tax is then worked out on quantity × unit price, not on the Amount you type. Neither Create From nor Quick Add sets a tax group, so lines added on the web to a financial note (blank Transaction Type) carry no tax, and the note posts no tax reversal. To credit tax on the web, use a SaleReturn note.
- Posting. Post General Ledger posts the note. Its Status and GL Posting Status move from Draft to Posted. The entries depend on the Transaction Type (see the table above). A line's GL Account, when set, is the account its leg posts to. Otherwise xMatix uses your posting definitions or the chart's default account. The GL Account on the note header is not used for the posting.
- Applying. When a posted customer credit note names an Invoice, it is applied to that invoice's open balance automatically, up to the smaller of the two open amounts. A purchase credit that names its bill is applied to the bill the same way. The note's Adjusted Amount and Open Amount follow what has been applied. An administrator can turn this off; see Configuration.
- Changing a posted note. A posted note can no longer be edited from its header: Edit and the field pencils disappear. Its lines can still be changed. xMatix then re-posts the note's journal from the new figures.
- GST. A posted customer credit note is recorded as outward tax for GSTR-1. A purchase credit is recorded as inward tax for GSTR-2B and the input tax credit. See GSTR-1 and GSTR-2B.
- Stock. Credit notes do not move stock. No inventory ledger rule covers credit note lines, so Post Inventory posts nothing and Inventory Posting Status stays Draft. Record stock that physically comes back with an inventory document. See Inventory ledger.
Prerequisites
- Your security profile can open the Finance app and its Adjustments list, and can create credit notes. To post, it also needs the Post General Ledger action. See Permissions.
- The company (Partner Account) has GL posting turned on, and the fiscal period for the document date is open. See Fiscal years and periods.
- The chart of accounts has the receivable or payable control account and the sales, purchase and tax accounts that posting needs. See Chart of accounts, books and periods.
- For a credit against an invoice: the invoice exists and is not cancelled.
Procedure
Step 1 — Raise a credit note from an invoice
This is the quickest way to credit an invoice.
- Open the invoice.
- Select Create Credit Note in the page header. It may be under the header's overflow menu.
- Confirm with Create.
xMatix creates a Draft credit note against the invoice and opens it. The customer, company, branch, price list, supply type and place of supply are copied from the invoice, and Invoice is set. Transaction Type is left blank, so this is a financial credit note. The note has no lines yet. Add them in Step 3.
If you select Create Credit Note again while that draft still has no lines, xMatix reopens the same draft instead of raising a second one. Once a draft has lines, the button raises a new note, so you can credit one invoice in several parts.
Step 2 — Create a credit note directly
Use this for a sale return, a purchase credit, or a credit that is not tied to one invoice.
- Open Finance → Adjustments → Credit Notes and select New.
- Fill in the form:
- Partner Account — your company that issues the note.
- Branch — the branch of that company.
- Account — the customer. The list offers active customer accounts.
- Under Details: Transaction Type (leave it blank for a financial credit note, or pick SaleReturn or BillReturn), Invoice (the invoice being credited, for a customer credit note) and GL Account.
- Save.
The note is created as Draft and opens on its record page.
For a BillReturn note, the party is the supplier, and Supplier Account is not on the create form. On the record page, open the Details tab and set Supplier Account under Key Information (select the value to edit it). It must be a supplier account. Do this before you post.
Step 3 — Add the lines
The Lines tab lists the note's lines. There are two ways to add them.
Copy lines from invoices (Create From).
- Select Create From in the page header.
- A dialog lists invoice lines with a remaining returnable quantity. If the note has an Invoice, only that invoice's lines are listed. If it has none, the lines of every invoice of the note's company (and branch, when set) are listed, across all customers. Narrow the list with search and filters.
- Tick the lines to credit and change Quantity where you credit less than the full line.
- Select Save.
A line is created for each ticked row, with the item, quantity and a link to the invoice line. The dialog shows "N record(s) created successfully." and the Lines list refreshes.
Create From copies the item and quantity only. Open each new line and check its Amount before you post; see Step 4.
Add a line by hand (Quick Add).
- On the Lines tab, select Quick Add.
- Fill in GL Account, Return Type, Item, Quantity and Description. Item is optional, so a line can be a plain amount with a description.
- Save, then open the line and enter its Amount (Step 4).
Step 4 — Check each line's amount
A line's Amount is what the note credits for it. It is not calculated from quantity and price on lines you add by hand or with Create From, so enter it yourself.
- Select the line's name in the Lines list to open it.
- Under Key Information, select the Amount value and type the amount before tax.
- Save.
The line's GL Amount follows its Amount. On a SaleReturn or BillReturn note, the line's tax was already worked out from its tax group when it was added. Back on the note, the Amounts panel shows the totals: line base amount, scheme discount and discount, line tax, any charges or document discounts, and Total Amount.
Step 5 — Post the credit note
- Check the Amounts panel and the lines.
- Select Post General Ledger in the page header.
The note's Status and GL Posting Status become Posted. The journal appears under Related → Journals, and the receivable or payable item under Related → Open Transactions. Edit and the field pencils disappear from the header.
If the note names an invoice, it is applied to that invoice at the same time, unless your administrator has turned automatic application off. The application appears in the note's Amounts panel, and Adjusted Amount and Open Amount change. If the note names nothing, it stays open on the customer's account. It counts in the customer's ageing as a credit not yet applied.
Step 6 — Correct or remove a credit note
- Before posting, use Edit (it opens the create form) or select a field on the Details tab to change it. Lines can be edited or deleted from the Lines list.
- After posting, the header cannot be edited. To change an amount, open the line and change it. xMatix re-posts the note's journal. A re-post is refused if the note's applications no longer fit the new total. Reduce or remove the applications first.
- Delete removes the note. A posted note's journal is reversed and its applications are undone, so the invoice it was applied to is open again for that amount. There is no Cancel action on credit notes.
- Clone copies the note and its lines into a new Draft note with posting and application figures cleared.
Fields
Credit note — create form
| Field | What it means | Notes |
|---|---|---|
| Partner Account | Your company that issues the note | Active partner accounts only. Hidden on tenants with a single company |
| Branch | The company's branch | Filtered to the selected company. Hidden on tenants with a single location |
| Account | The customer | Active customer accounts only. The party for blank, SaleReturn and Claim Settlement notes |
| Transaction Type | The kind of credit | SaleReturn, BillReturn or Claim Settlement; blank for a financial credit note. See Overview |
| Invoice | The invoice being credited | Applied to automatically when the note posts. Limits Create From to its lines |
| GL Account | A GL account for the note | Not used when the note posts. Fills Branch from the account's default branch when Branch is empty |
Credit note — record page
The header shows Document Date, Partner Account, Branch, GL Account and Amount. The Details tab shows:
| Field | What it means | Notes |
|---|---|---|
| Supplier Account | The supplier on a BillReturn note | The party the payable is reduced for. Must be a supplier account |
| Amount | Sum of the line amounts, before tax | Calculated |
| Total Line Tax Amount | Sum of the line tax | Calculated |
| Total Amount | The note's total: line gross amounts plus Round Off | Calculated. The amount applied and posted |
| Status | Draft or Posted | Set by posting, never typed |
| Document Date | The note's date | Set to the creation date. Decides the fiscal period |
Fields that appear in lists and reports:
| Field | What it means |
|---|---|
| Adjusted Amount | How much of the note has been applied to invoices or bills, or refunded |
| Open Amount | Total Amount less Adjusted Amount: the credit still available |
| GL Posting Status | Draft or Posted |
| Inventory Posting Status | Stays Draft; credit notes do not post stock |
Credit note line
| Field | What it means | Notes |
|---|---|---|
| GL Account | The account this line's leg posts to | Optional. Without it, posting uses a posting definition or the chart's default sales (or purchase) account |
| Return Type | Why the goods came back | Damaged, Expired, Wrong Item, Excess, Shortage, Unsold, Other. Damaged, Shortage and Excess lines are claimable on a trade claim |
| Item | The item credited | Optional. An inactive item is refused on return notes |
| Quantity | Quantity credited or returned | On Create From lines, the quantity you kept in the dialog |
| Description | Free text | |
| Invoice | The invoice the line credits | Set on lines created with Create From |
| Amount | The line's amount before tax | Typed. The note's Amount is the sum of these |
| GL Amount | The amount the line posts | Follows Amount |
Business rules
- Party checks. On a BillReturn note, Supplier Account must be a supplier account: The selected account is not a supplier account. On a SaleReturn note, the company, branch and executive are checked when the note is created.
- Fixed fields on sale returns. Once a SaleReturn note is saved, Account, Partner Account, Branch and Document Date cannot be changed.
- Return lines. On SaleReturn and BillReturn notes, a new line's item must be active and, when the item needs one, have a valid SKU. A return line's item, lot and SKU cannot be changed once the line has a quantity, and fields copied from the source invoice or bill line cannot be edited.
- Returned quantities. SaleReturn lines that name an invoice line add their quantity to that invoice line's Returned Quantity, and to the delivery order and order lines behind it. BillReturn lines that name a bill line do the same on the bill, purchase order and goods receipt lines. Editing or deleting the line recalculates these. Financial credit note lines do not write back, so the same invoice lines stay available in Create From.
- Bill link. A credit note linked to a bill must be a BillReturn note for the same supplier and company, and the bill must not be cancelled. Blank supplier, company and branch are taken from the bill.
- Posting is per type. Blank and Claim Settlement notes post like a financial credit note, SaleReturn notes post the same customer-side entries, and BillReturn notes post the supplier-side entries.
- Automatic application. A customer note posted with an Invoice is applied to it when the invoice is not cancelled and has the same customer and company. A BillReturn note linked to a bill is applied to that bill, after any TDS reversal. Each note is applied once to its document.
- TDS. Posting a note whose lines carry a TDS section reverses the TDS of the document it credits.
- Re-posting. Changing a financial field on a posted note (its lines, round-off, party, date or GL account) re-posts the journal once, from the final figures.
- Edit lock. Edit and in-place editing are hidden once Status or GL Posting Status is Posted.
Example
A distributor invoices a hardware store for 40 tins of wood polish at 250 each, plus 18% GST. Six tins arrive with dented lids, and the store sends them back.
- The accounts clerk opens the invoice and selects Create Credit Note, then Create. A Draft note opens with the store as Account and the invoice in Invoice.
- Because goods come back, the clerk selects Edit, sets Transaction Type to SaleReturn and saves.
- The clerk selects Create From, ticks the wood polish line, changes Quantity to 6 and selects Save. One line is created. It takes its tax group from the tax group rules and the price list price of 250, so its tax is 270 (18% of 1,500).
- The clerk opens the new line and enters Amount 1,500. The note's Total Amount shows 1,770.
- The clerk selects Post General Ledger. The note's Status becomes Posted. The journal reverses 1,500 of sales and 270 of GST and reduces the store's receivable by 1,770.
- The note is applied to the invoice automatically: the invoice's open amount drops by 1,770, and the note's Open Amount becomes 0. The invoice line's Returned Quantity shows 6.
- The warehouse records the six tins coming back with an inventory adjustment, because the credit note does not move stock.
Training
Practice exercise
In a sandbox with GL posting enabled for your company:
- Create and post an invoice for any customer: one line, quantity 10, unit price 100.
- On the invoice, select Create Credit Note and confirm.
- On the credit note, use Create From to credit 3 of the 10 units, and enter an Amount of 300 on the new line.
- Post the credit note.
Expected result: the credit note's Status is Posted and its Related → Journals tab shows one journal. The invoice's open amount has dropped by the note's Total Amount, and the credit note's Open Amount is 0. Selecting Create Credit Note on the invoice again raises a new Draft note, because the first one has lines.
Quick reference
- Finance → Adjustments → Credit Notes lists every credit note.
- Invoice → Create Credit Note raises a Draft financial note against that invoice.
- Create From copies invoice lines; enter each line's Amount afterwards.
- Blank Transaction Type means a financial credit note; BillReturn means a supplier credit.
- Set Supplier Account on a BillReturn note before posting.
- Post General Ledger posts the note and applies it to its invoice.
- Credit notes never move stock.
- A posted note's header is locked; change a line to re-post it.
- Delete reverses a posted note; there is no Cancel.
Permissions
The seeded Sales, Sales Executive, Sales Manager, Standard User and System Admin profiles can view, create, edit and delete credit notes and their lines. The page-header actions need their own grant on the profile's Actions tab:
| Action | Profiles granted out of the box |
|---|---|
| Create From | Sales Executive, Standard User, System Admin |
| Post General Ledger | Sales Manager, Standard User, System Admin |
| Post Inventory | Standard User, System Admin |
| Clone | Sales Executive, Standard User, System Admin |
| Invoice → Create Credit Note | Sales, Sales Executive, Sales Manager, Standard User, System Admin |
The Sales profile has no credit note action grants. A user without a grant is refused when they run the action. The Adjustments list in the Finance app is visible to profiles that have that app enabled. To change any of this, see Security profiles.
Configuration
| Setting | Where | What it does |
|---|---|---|
| Apply a credit note to its invoice when it posts | Setup → Feature Hub → Modules → Finance → Settings, Receivables & Payables group | On by default. Applies a posted note to the invoice (or bill) it names, for the smaller of the two open amounts. Notes brought in by an integration sync are skipped. With it off, a posted note stays unapplied: the invoice's payment dialog lists credit notes for information only |
| Tax rounding | Setup → Feature Hub → Modules → Finance → Settings, Tax group | Line (default) rounds each line's tax; Document rounds each tax once on the note total. See Tax groups |
| Post synced Credit Notes automatically | Setup → Feature Hub → Modules → Finance → Settings, Auto-post synced documents group | Off by default. Posts credit notes that arrive through an integration sync. It posts nothing until Only documents created on or after is also set in the same group. Notes created in xMatix are never auto-posted |
| Numbering | Setup → Design Studio → Entities → Credit Note → Logic → Document Settings | The CN series for notes and CNL for lines |
| Posting accounts | Finance settings: posting definitions and the chart of accounts | Decide the sales, purchase, tax, rounding and control accounts a note posts to. See Chart of accounts, books and periods |
| Page header actions | Setup → Design Studio → the CreditNoteView layout → Page Header | Repost GL Posting and Post TDS exist as actions but are not on the seeded header. Add them here if your finance team needs them |
Post Adjustments is on the seeded header but does not work for credit notes: it always ends in an error. Remove it from the page header so users don't run it.
Common problems
"Action failed" when I select Post Adjustments
Credit notes do not support this action. Remove it from the layout's page header. A credit note is applied to its invoice when it posts, or through a claim settlement.
The credit note posted with a total of zero, or nothing posted
The lines have no Amount. Create From and Quick Add do not fill it. Open each line and enter its Amount, then post again. Posting also does nothing when the company has GL posting turned off.
My credit note shows no GST
The note's Transaction Type is blank. Lines added on the web to a financial credit note get no tax group, so they carry no tax. Before adding lines, use Edit to set Transaction Type to SaleReturn. New lines then get their tax group from your tax group rules. Lines already added keep no tax, so delete them and add them again.
"Party Account is required on lines posting to a control account."
The note has no party. A blank, SaleReturn or Claim Settlement note needs an Account, and a BillReturn note needs a Supplier Account. Set it on the Details tab and post again.
"No GL account resolved for line …" or "… for document header …"
xMatix found no account for a line or for the receivable or payable leg. Set GL Account on the line, or ask your administrator to add a posting definition or the chart's default account.
"Fiscal period '…' is … — posting is not allowed."
The note's document date falls in a closed or locked period. Ask your finance lead to reopen the period, or create the note in an open period.
"The selected account is not a supplier account."
Supplier Account on a BillReturn note must be a supplier. Pick a supplier account.
"Key fields are not editable once the related objects are added. Field Name : …"
You changed the customer, company, branch or document date of a saved SaleReturn note. Delete the note and create a new one.
"Invoice '…' is cancelled; there is nothing left to credit."
Create Credit Note is refused on a cancelled invoice. The cancellation already reversed it.
Create From lists lines from other customers
The note has no Invoice, so Create From lists every invoice line of your company. Set Invoice on the note first, then use Create From.
Create From says "Cannot load lines"
The note has no Partner Account. Set it, save, and try again.
Edit is missing on my credit note
The note is posted. Change its lines instead, or delete it and raise a new one.
Post Inventory did nothing
Credit notes do not post stock. If the message is No Credit Note Lines found for Inventory Posting., the note has no lines.
Common questions
Does a credit note bring stock back into the warehouse?
No. No inventory ledger rule covers credit note lines, so even a SaleReturn note leaves stock unchanged, and Post Inventory posts nothing. Record the goods that come back with an inventory document, for example an inventory adjustment, so that stock and the credit both reflect the return. The return quantities on the invoice, delivery order and order lines are still updated for SaleReturn notes.
How do I apply a credit note to an invoice?
Set the Invoice field before you post. When the note posts, it is applied to that invoice automatically, up to the smaller of the two open amounts, as long as both have the same customer and company. A note that names no invoice stays open on the customer's account. It shows in the payment dialog and in ageing as a credit, but the payment dialog lists it for information only.
What is the difference between a blank Transaction Type and SaleReturn?
Both reduce the customer's receivable and reverse sales and output tax. A SaleReturn note also keeps the return quantities on the invoice, delivery order and order lines up to date, defaults its price list and discount group, and locks its customer, company, branch and date after the first save. Use a blank type for price corrections and credits that are not returns of goods.
Can I cancel a posted credit note?
There is no Cancel action. Delete the note: a posted note's journal is reversed, and any application to an invoice is undone, so the invoice is open again for that amount. Then raise a corrected note if needed.
Why did the claim settlement not post my credit note?
A credit note created by a claim settlement is created as a Draft, even when the settlement setup's Auto GL Posting is on. Open it from the claim's Related → Credit Notes list and select Post General Ledger.
Related topics
- Invoices — cancelling within the window, and when to use a credit note instead.
- Invoice lines — returned quantities on invoice lines.
- Recording and applying payments
- AR and AP subledgers — open items, settlement and ageing.
- Trade claims — settlement by credit note.
- GSTR-1 — how credit notes reach the outward return.
- Credit Note reference and Credit Note Line reference