> ## Documentation Index
> Fetch the complete documentation index at: https://docs.hitaji360.com/llms.txt
> Use this file to discover all available pages before exploring further.

# Credit Notes (Sales Returns)

> 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…

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.*

***

## 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).

***

## The credit-note lifecycle (statuses)

The Credit Notes screens show four simple statuses:

| Status      | Meaning                                                                         | Underlying state                   |
| ----------- | ------------------------------------------------------------------------------- | ---------------------------------- |
| **Draft**   | Raised but not yet posted; editable, deletable.                                 | Draft                              |
| **Issued**  | Posted — the reversing journal entry is live; credit is now available to apply. | Sent / Partially applied / Overdue |
| **Applied** | Fully used up — all of its value has been applied to invoices or refunded.      | Paid                               |
| **Void**    | Cancelled and reversed out.                                                     | Void                               |

***

## 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.

### 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.

### What you provide

| Field              | Required | Notes                                                                                                                                       |
| ------------------ | -------- | ------------------------------------------------------------------------------------------------------------------------------------------- |
| **Reason**         | Yes      | Why the credit note is being raised (e.g. goods returned, pricing correction). Stored for audit and printed on the document.                |
| **Line overrides** | No       | For a **partial return**, specify the source line(s) and the quantity to return on each. Omit this to return the **whole invoice** in full. |

### 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.

#### 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.*

***

## 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.

***

## 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.

***

## 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.

***

## 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.

***

## Deleting a draft

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

***

## Permissions

Credit notes reuse the invoice permission slugs:

| Action                            | Permission                   |
| --------------------------------- | ---------------------------- |
| View credit notes                 | `accounting-invoices:read`   |
| Raise a credit note               | `accounting-invoices:create` |
| Issue / allocate / refund residue | `accounting-invoices:update` |
| Unapply an allocation / void      | `accounting-invoices:void`   |

***

## 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:

|                                                      | Debit                | Credit            |
| ---------------------------------------------------- | -------------------- | ----------------- |
| **Sales / income account** (per returned line)       | Returned net amounts |                   |
| **Tax Payable** (VAT), if any                        | Reversed tax         |                   |
| **Accounts Receivable** (the customer owes you less) |                      | Credit-note total |

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.

***

## 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.

***

## Related

* [Sales Invoices](/accounting/user/transactions/sales-invoices) — the documents a credit note reverses or reduces
* [Payments](/accounting/user/transactions/payments) — recording and allocating customer payments
* [Quotations](/accounting/user/transactions/quotations) — pre-sale offers that become invoices