Debit notes

A debit note is the document that changes a party's balance in your favour. A supplier debit note is the one you raise on a supplier to reduce what you owe on a bill, for example for a price difference or a shortfall. A customer debit note increases what a customer owes you, and xMatix raises these for you when it charges interest on overdue invoices or when you bring a missing GSTR-1 note into your books. The note comes after the bill or invoice it adjusts. When it is posted, xMatix books it to the ledger and, for a supplier note that names its bill, applies it to that bill.

Overview

One Debit Note record covers both directions. The Transaction Type field decides which one a note is:

Every note you create with New is a supplier debit note: the form leaves Transaction Type blank and offers only supplier accounts. Customer debit notes are created by interest runs and by Add In Books in GSTR-1.

Debit notes live in the Finance app under Adjustments → Debit Notes, beside credit notes. Each note has lines, and the note's Amount is the total of its line amounts.

When to use it

• A supplier billed you too much, for example a price above the agreed rate, a shortfall or a quality deduction, and you want to record the reduction against the bill.
• You need a document, rather than a manual journal, so the adjustment stays linked to the bill, the supplier's balance and the bill's TDS. See Working with journals.

Use a credit note with Transaction Type BillReturn instead when the supplier sends you their own credit note, or when goods go back to the supplier. Interest a supplier charges you is a bill, not a debit note.

How xMatix handles it

• Numbering. A new debit note is named from the DN series and each line from the DNL series.
• Lines carry the money. The note's Amount is the sum of the line Amount values, and its GL Amount follows Amount. Debit note lines have no item, quantity or price. Each line is an amount posted to a GL account.
• No tax on notes you create. Lines added on the web carry no tax, because debit note lines have no tax group and their tax fields are on no form. Customer debit notes raised by interest runs and Add In Books carry tax amounts on their lines.
• Posting. Post General Ledger posts the note, and GL Posting Status becomes Posted. A line's GL Account, when set, is the account its leg posts to. Otherwise xMatix uses your posting definitions and then the chart's default account (expense for a supplier note, sales for a customer note). On a supplier note the GL Account on the note header is not used. On a customer note it names the receivable account to debit.
• TDS. When a supplier note names a Bill that withheld TDS, posting also reverses the TDS on the part the note takes back, at the rate the bill was deducted at. The reversed amount is stored on the note, and the note is applied to the bill net of it.
• Applying. A posted supplier note that names its Bill is applied to that bill automatically, for the smaller of the two open amounts, as long as both have the same supplier and company and the bill is not cancelled. Any other posted supplier note can be applied by hand from the bill's Apply payment dialog. Adjusted Amount and Open Amount on the note follow what has been applied. A customer debit note is never applied automatically. It raises its own receivable item, which the customer settles like an invoice.
• Changing a posted note. The header and lines of a posted note stay editable. A change to a financial field (an amount, a GL account, the party, company, branch or date), or adding or deleting a line, re-posts the note's journal from the new figures.
• GST. A posted customer debit note records output tax lines for GSTR-1, Tables 9 and 10. A supplier debit note records no tax lines, so it never reaches GSTR-1, GSTR-2B or the input tax credit figures.
• Stock. Debit notes never move stock.

Prerequisites

• Your security profile can open the Finance app and its Adjustments list, and can create debit 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 note's Document Date is open. See Fiscal years and periods.
• The chart of accounts has an accounts payable control account and the expense account the lines post to. To reverse TDS, it also needs a TDS Payable control account. See Chart of accounts, books and periods.
• The supplier's account has Supplier Account ticked.

Procedure

Step 1 — Create the debit note

1. Open Finance → Adjustments → Debit Notes and select New.
2. Fill in the form:
   • Partner Account — your company that raises the note.
   • Branch — a branch of that company.
   • Account — the supplier. The list offers active supplier accounts.
   • GL Account — optional. It is not used when a supplier note posts.
   • Document Date — the note's date. It is required and decides the fiscal period the note posts in.
3. Save.

The note is created with a DN number and opens on its record page. The header shows Document Date, Partner Account, Branch, Account and Amount. On a tenant with a single company or a single location, Partner Account and Branch are hidden.

Step 2 — Link the bill

To reverse the bill's TDS and apply the note to the bill when it posts, name the bill:

1. On the record page, open the Details tab.
2. Under Key Information, select the Bill value and pick the supplier's bill.
3. Save the change.

The Bill list is not narrowed to the note's supplier, so check that you pick a bill of the same supplier and company. A bill of another supplier is accepted on save but the note is never applied to it.

Step 3 — Add the lines

1. On the Lines tab, select Quick Add.
2. Fill in GL Account (the account the line posts to, for example the expense or purchase account the bill charged) and Amount (the amount the note takes off).
3. Save.

The line appears in the Lines list with its name, GL account and amount, and the note's Amount is updated. Quick Add also shows a Bill box. A line does not keep it, so name the bill on the note (Step 2).

To change a line's GL Account or Amount, select Edit on its row in the Lines list. To see the whole line, select its name: the line's record page shows Branch, GL Amount, Amount and Bill Line, and an Amounts panel. Select a value there to edit it. Set Bill Line when the bill has more than one TDS section: the line's TDS reversal then uses the section of that bill line. The Bill Line list is not narrowed to the note's bill.

Step 4 — Post the debit note

1. Check the lines and the note's Amount.
2. Select Post General Ledger in the page header.

The note's GL Posting Status becomes Posted. If the note names a bill, the bill's TDS is reversed on the note's share and the note is applied to the bill, so the bill's open amount falls. The note's Adjusted Amount and Open Amount show what has been applied. The journal is listed in Finance → Journals.

Step 5 — Apply a note to a bill by hand

Use this for a posted supplier note that names no bill, or that was not applied when it posted.

1. Open the supplier's bill.
2. On the bill's amount card, select Apply payment.
3. The dialog lists the supplier's posted debit notes beside their payments and credit notes. Pick the debit note and the amount to apply.
4. Confirm.

The bill's open amount falls by the amount applied, and the note's Open Amount falls with it.

Step 6 — Complete a customer debit note

Customer debit notes are created for you:

• Interest runs. Post Interest raises one posted customer debit note for each receivable interest charge, linked to the overdue invoice. See Interest on overdue payments.
• GSTR-1 Add In Books. On a debit note row that is Missing in Books, Add In Books drafts an unposted customer debit note, with one line per tax rate GSTN reports. Open the draft from Finance → Adjustments → Debit Notes, use Edit on each line in the Lines list to set its GL Account (the income account), check the amounts and select Post General Ledger. See GSTR-1.

A posted customer debit note raises a receivable on the customer's account. It stays open, and ages like an invoice, until a receipt settles it. See Recording and applying payments.

Step 7 — Correct, copy or remove a debit note

• Change it. Use Edit (it opens the create form) or select a field on the Details tab. Edit or delete lines from the Lines list. On a posted note, a financial change re-posts the journal. A re-post is refused when the new total is below what has already been applied. Reduce or remove the applications first.
• Delete it. Delete removes the note. A posted note's journal is reversed and its applications are released, so the bill is open again for that amount. There is no Cancel action on debit notes.
• Clone it. Clone copies the note and its lines into a new unposted note, with the posting, application and TDS figures cleared. The copy keeps the Bill and Transaction Type.

Fields

Debit note — create form

Debit note — record page, Details tab

Fields that appear in lists, reports and the payment dialogs:

Debit note line

Business rules

• Supplier check. On every save, Account must be an account with Supplier Account ticked: The selected account is not a supplier account. The check applies to customer debit notes too.
• System fields. Is GL Posted and General Ledger cannot be set by hand: The system field … is not editable.
• Posting needs GL posting on. A note whose company has GL posting turned off, or that has no Partner Account, posts nothing.
• Account order. A line posts to its own GL Account, else to a posting definition, else to the chart's default account by type. The supplier note's payable leg is resolved from the payable posting definition or the payable control account.
• TDS reversal. Only a supplier note that names a Bill reverses TDS, and only when the bill withheld TDS and the supplier has TDS Applicable on. Each line reverses at the rate of its Bill Line's section, or of the bill's section when the bill has one.
• Automatic application. Runs after posting for a supplier note with a Bill, once per note and bill. It is skipped when the bill is cancelled, belongs to another supplier or company, or when the note came from an integration.
• Re-posting. Changing a financial field of a posted note or its lines re-posts the journal once per save, from the final figures.
• No status lock. Posted notes keep Edit and in-place editing.

Example

A distributor bills a retailer's purchasing team 1,00,000 for packaging cartons, with 10,000 TDS withheld on the bill, so 90,000 is open. The cartons were charged at a higher rate than the agreed price, and the difference is 10,000.

1. The accounts clerk opens Finance → Adjustments → Debit Notes, selects New, picks the company, branch and the carton supplier, enters today's date and saves. Note DN-… opens.
2. On the Details tab the clerk sets Bill to the carton bill.
3. On the Lines tab the clerk selects Quick Add, picks the packaging expense account, enters Amount 10,000 and saves. The note's Amount shows 10,000.
4. The clerk selects Post General Ledger. GL Posting Status becomes Posted.
5. xMatix reverses 1,000 of the bill's TDS (10% of 10,000) and applies the remaining 9,000 to the bill. The bill's open amount falls from 90,000 to 81,000.

Training

Practice exercise

In a sandbox with GL posting enabled for your company:

1. Create and post a bill for any supplier, with one line of 5,000 and no TDS.
2. Create a debit note for the same supplier and company, set Bill to that bill on the Details tab, and add one line of 500 with Quick Add.
3. Post the debit note.

Expected result: the debit note's GL Posting Status is Posted, its Adjusted Amount is 500 and its Open Amount is 0. The bill's open amount has fallen by 500. Look up the note's journal in Finance → Journals: the supplier's payable account should be debited by 500. If it is credited instead, see Common problems.

Quick reference

• Finance → Adjustments → Debit Notes lists every debit note.
• New creates a supplier debit note; customer notes come from interest runs and GSTR-1.
• Set Bill on the Details tab before posting, so TDS is reversed and the note is applied.
• Add lines with Quick Add: GL Account and Amount.
• Debit notes you create carry no GST.
• Post General Ledger posts the note and applies it to its bill.
• Apply other notes from the bill's Apply payment dialog.
• 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 debit notes and their lines. The page-header actions need their own grant on the profile's Actions tab:

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

Debit notes are not covered by the Auto-post synced documents settings, and the Tax rounding setting does not apply to them.

Common problems

"Action failed" when I select Post Adjustments

Debit notes do not support this action, and it always ends in an error. A supplier note is applied to its bill when it posts, or from the bill's Apply payment dialog. Ask your administrator to remove the button from the page header.

"The selected account is not a supplier account."

The note's Account is not marked as a supplier. Pick a supplier account. The check runs on customer debit notes too, so a customer debit note drafted by GSTR-1 Add In Books cannot be saved or posted unless the customer's account also has Supplier Account ticked.

The note posted nothing, or posted zero

The note has no lines, or its lines have no Amount. Add lines with an amount and post again. Posting also does nothing when the company has GL posting turned off.

The journal increases what I owe the supplier

Check the note's journal in Finance → Journals. On the standard setup, a supplier note line's GL Amount is calculated as minus its Amount, and xMatix posts a negative amount on the opposite side, so the payable can be credited instead of debited. Ask your administrator to check the GL Amount calculation of the Debit Note Line entity before you rely on supplier debit notes.

"No GL account resolved for line …" or "… for document header …"

xMatix found no account for a line, or for the payable or receivable leg. Set GL Account on the line, or ask your administrator to add a posting definition or the chart's default account.

"No TDS Payable control account … is configured."

The note names a bill with TDS, and the company has no TDS Payable control account to reverse it to. Ask your administrator to tag one. See GL accounts.

"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 change the date to one in an open period.

"… cannot be re-posted at …"

You reduced a posted note below what has already been applied to a bill. Remove or reduce the application on the bill first, then change the note.

The note was not applied to its bill

The bill belongs to another supplier or company, the bill is cancelled, or the automatic application setting is off. Check the Bill on the Details tab, then apply the note from the bill's Apply payment dialog.

My debit note shows no GST

Lines you add on the web carry no tax. A supplier debit note records no GST lines in any case. If the tax must be adjusted, use a credit note with Transaction Type BillReturn, which reverses input tax.

Common questions

What is the difference between a debit note and a BillReturn credit note?

Both reduce what you owe a supplier, both can name the bill and both are applied to it net of the bill's TDS. A debit note is the document you raise yourself, with amount-only lines and no tax. A credit note with Transaction Type BillReturn records the credit the supplier gives you: it reverses input tax, reaches GSTR-2B and can update returned quantities on bill lines. Use a BillReturn credit note when goods go back or the tax changes.

Can I raise a debit note on a customer myself?

The standard form offers only supplier accounts, and every save checks that the account is a supplier. Customer debit notes are raised by interest runs and by GSTR-1 Add In Books. To charge a customer for something else, raise an invoice.

How is the TDS on the bill handled?

When the note names a bill that withheld TDS, posting reverses the TDS on the part the note takes back, at the rate the bill was deducted at. For example, a 10,000 note against a bill that withheld 10% gives back 1,000 of TDS and takes 9,000 off the bill. The bill's open amount then matches what you still owe the supplier after TDS.

Can I cancel a posted debit note?

There is no Cancel action. Delete the note: a posted note's journal is reversed and its application to the bill is undone, so the bill is open again for that amount. Then raise a corrected note if you need one.

Related topics

• Bills — the supplier bills debit notes reduce.
• Credit notes — supplier credits with BillReturn, and customer credits.
• Recording and applying payments
• AR and AP subledgers — open items, settlement and ageing.
• Interest on overdue payments — customer debit notes for interest.
• GSTR-1 — how customer debit notes reach the outward return.
• Debit Note reference and Debit Note Line reference