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A credit note is the document you raise to reduce or reverse a sales invoice you’ve already issued — because goods were returned, you over-charged, you’re granting a post-sale discount, or you’re cancelling part of an order. It is the proper accounting way to “take money back off” an invoice without deleting history: it posts its own reversing journal entry and gives the customer a credit they can apply to other invoices or be refunded. This page covers raising a credit note against an invoice, issuing it, applying (allocating) it to open invoices, refunding any leftover, and what happens in your accounts. You’ll find this at: /accounting/credit-notes
📷 Screenshot: Credit Notes list page with the Draft / Issued / Applied / Void tabs — to be added.

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How credit notes work in Hitaji 360

Under the hood a credit note is stored as a special kind of invoice (a “return” document) so it shares the same numbering, PDF, and posting machinery as a normal invoice — but its quantities and amounts are negative, which is what makes it reverse rather than charge. You don’t need to think about that day to day; the screens present it as a distinct Credit Note with its own number (e.g. CN-2026-06-000001). A credit note always points back to one source invoice (the invoice it returns against).

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The credit-note lifecycle (statuses)

The Credit Notes screens show four simple statuses:

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Raising a credit note

A credit note is created against an existing invoice. From the source invoice (or from the Credit Notes screen) choose to create a credit note / sales return.

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Which invoices can be returned

The source must be a regular sales invoice (not itself a credit note or other-receivable debt), it must not be deleted, and it must be in one of these states:
  • Sent
  • Partially Paid
  • Paid
  • Overdue
You cannot raise a credit note against a Draft or unsent invoice — there is nothing posted to reverse yet.

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What you provide

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Full vs partial return

  • Full return — leave line overrides empty and every line of the source invoice is credited in full.
  • Partial return — list only the lines you’re returning, each with a return quantity. The quantity is entered as a positive number; the system negates it internally.

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Built-in safeguards

When the credit note is created, several checks run automatically and will block an invalid return:
  • You can’t return more than was invoiced. The return quantity per line is capped at the original quantity minus anything already returned on earlier credit notes against the same invoice. Over-returning is rejected with a clear message.
  • The customer and currency are inherited from the source invoice — they can’t be changed, which keeps the credit pointed at the right party.
  • The credit-note date can’t precede the source invoice’s date.
  • The credit note must include at least one source line.
The credit note is created as a Draft, carrying forward each returned line’s description, unit price, income account, tax rate, tax code, stock item, warehouse, unit of measure, and cost centre — so the reversal lands on exactly the same accounts as the original sale.
📷 Screenshot: Create credit note form showing the reason picker and per-line return quantities — to be added.

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Issuing the credit note (this posts to the ledger)

A Draft credit note hasn’t touched your accounts yet. Choose Issue to post it. Behind the Issue button the credit note walks the same path as an invoice: it is submitted (auto-approved if your book has no approval rule, otherwise it goes for approval) and then sent, which is the moment the reversing journal entry posts. Once issued, the credit note shows as Issued and its value becomes available to apply.

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Applying (allocating) the credit to invoices

An Issued credit note holds a credit balance you can apply against the customer’s open invoices. From the credit note choose Allocate.
📷 Screenshot: Allocate credit note modal listing the customer’s open invoices and amount inputs — to be added.
You choose one or more target invoices and the amount to apply to each. The system enforces:
  • Each target must be a regular invoice belonging to the same customer and same currency as the credit note.
  • Each target must be Sent, Partially Paid, or Overdue (i.e. it has an outstanding balance).
  • You can’t apply more than the credit note’s remaining balance, and you can’t apply more to a target than that invoice still owes.
Applying credit reduces the outstanding balance on the target invoice(s) (moving them toward Paid) and draws down the credit note’s own balance. When the whole credit is used up, the credit note becomes Applied.
Changing your mind: Allocations use replace-all logic, so you can adjust them. You can unapply an individual allocation — the system rebuilds the remaining set and posts the offsetting entry, returning that credit to the note and the balance to the invoice.

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Refunding the residue

If the customer should get cash back rather than applying the credit to other invoices, choose Refund residue on a credit note that still has an unapplied balance (status Issued or partially applied). You select the bank or cash account the refund is paid from (and optionally a payment method and reference). The system pays out the remaining balance and settles the credit note to Applied. You can’t refund a credit note that’s already fully applied — there’s nothing left to refund.

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Voiding a credit note

Voiding cancels an Issued credit note and reverses its journal entry. To protect your books, the system blocks the void if the credit note has live work attached:
  • If it has active allocations, unapply each one first.
  • If a refund has already paid out its residue, reverse that payment first.
Once those are cleared, voiding reverses the credit note’s posting cleanly.

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Deleting a draft

A credit note that is still a Draft (nothing posted) can be deleted outright. Once Issued, use Void instead.

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Permissions

Credit notes reuse the invoice permission slugs:

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Behind the scenes — the accounting

A credit note posts the mirror image of the original sale. Where the invoice debited Accounts Receivable and credited revenue and tax, issuing the credit note does the reverse: So revenue and the VAT liability are reduced by the returned amounts, and the customer’s receivable balance falls. The credit note carries this reduction as its own outstanding credit, tagged to the customer. Applying the credit to an invoice posts a small balancing entry that nets the credit note’s outstanding against the target invoice’s outstanding — no cash moves, the two simply cancel down. Refunding the residue debits Accounts Receivable (clearing the credit) and credits your bank/cash account — that’s where real money leaves. Voiding reverses whichever of the above is still live, returning the accounts to their prior state.
If issuing fails with a message about a missing Accounts Receivable or Tax Payable system account, configure those accounts in your chart of accounts (or contact support) and retry.

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Multi-business note

Credit notes belong to the same accounting book as the invoice they return against, and they can only be applied to invoices for the same customer in the same book and currency. Confirm the workspace selector shows the right book before raising one.
  • Sales Invoices — the documents a credit note reverses or reduces
  • Payments — recording and allocating customer payments
  • Quotations — pre-sale offers that become invoices