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Suppose you sell goods to a customer. You send them an invoice and Dr Receivables; Cr Sales
Suppose that the customer returns the goods because they do not want them or maybe we supplied the wrong goods.
We then need to ‘cancel’ the invoice and to do this we send them a credit note (which is just a negative invoice). We then Dr Sales; Cr Receivables with the amount of the credit note.
Debit notes are less common but if a supplier sends us a credit note (because the bought goods bu then returned them) then we might call it a debit note.
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