Free Credit Note Template

A credit note reduces or cancels an amount owed on a previous invoice — issued for a return, an overcharge, or a billing correction.

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Your Business
Logo
Bill To
Invoice Details
Line Items
DescriptionQtyPriceTax %Total
Discount
Shipping / Handling
Subtotal$0.00
Tax$0.00
Total Due$0.00

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A credit note reduces or cancels an amount owed on a previous invoice — issued for a return, an overcharge, or a billing correction. It should always reference the original invoice number it corrects, since a credit note that stands alone with no clear link back is a common source of bookkeeping confusion for both sides.

Checklist

What to include on a credit note

How To

How to issue a credit note

  1. Reference the original invoice — number and date — in the notes.
  2. Give the credit note its own number (e.g. CN-0007); never reuse or edit the original invoice number.
  3. List what’s being credited — the returned items, the overcharged amount, or the cancelled service.
  4. Show the tax being reversed on credited items, at the same rate as the original invoice.
  5. State how the credit will be used — refunded, applied to the outstanding balance, or held against future invoices.
When To Use

When to issue a credit note

  • The customer returned goods or some goods arrived damaged.
  • You overcharged — wrong price, wrong quantity, duplicate line.
  • A discount or rebate was agreed after invoicing.
  • A service was cancelled or only partly delivered.
  • An invoice was issued in error and needs cancelling.

Why not just edit the invoice? Once an invoice is sent, it’s part of both sides’ accounting records — and in VAT/GST systems, issued invoices generally mustn’t be altered or deleted. A credit note corrects the record transparently.

Example

Credit note example

DescriptionQtyRateAmount
Returned: Desk lamp, black (INV-0213, line 2)2−$45.00−$90.00
Price correction: shipping overcharged1−$12.00−$12.00
Total credit — applied to account balance−$102.00 + tax reversed
Debit Notes

Credit note vs debit note vs refund

DocumentEffect
Credit note (credit memo)Reduces what the customer owes
Debit note (debit memo)Increases what the customer owes, or is issued by a buyer to request a credit
RefundThe actual return of money — often following a credit note
FAQs

Frequently asked questions

What is a credit note?

A document issued by a seller to reduce or cancel an amount on a previous invoice — for returns, overcharges, discounts or cancelled services. It references the original invoice.

Is a credit note the same as a refund?

No. A credit note records that the customer owes less; a refund is the money actually paid back. A credit can also be applied to future invoices instead of refunded.

Can I just delete the wrong invoice?

It’s better practice — and in VAT/GST systems usually required — to issue a credit note rather than delete or edit an invoice that’s already been sent.

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General information only. This page explains common practice and is not legal, tax, accounting or financial advice. Rules differ by country, state and industry and change over time — check the requirements that apply to you, or ask a qualified professional, before relying on it. Templates and calculators are provided as-is; you are responsible for the documents you create. Read our full disclaimer.