Credit notes

A credit note reduces what a customer owes you — for returned goods, a price correction, a missed discount or a goodwill credit. Posting it reverses the revenue and the output VAT and gives the customer a credit balance. You then apply that credit to one or more of their open invoices, or pay it back with a Refund receipt. How a credit, its allocations, its refunds and the customer's invoice balances relate is explained in Customer credit and balances.

Use a credit note to correct a posted invoice in an open or closed period without unposting it. (To fix a draft or a recent posted invoice that nothing depends on, you can also unpost and edit the invoice — see Invoices.)

Where to find it

• Sidebar: Sales → Payments & Credits → Credit Notes.
• URL: /ar/credit-notes; new credit note at /ar/credit-notes/create.
• Quick create: the + menu has New Credit Note under Sales.

The list

Columns: Credit Note No., Date, Customer, Subtotal, Tax, Total, Remaining, Status (you can choose which columns to show in a saved view). Remaining is the credit still available: the total less credit applied to invoices less posted refunds. It is 0 for a void note. Filter by status: Draft, Unapplied, Partially Applied, Fully Applied, Refunded, Void, by customer, by date range, and search by number.

The list's Remaining column already counts posted Refund receipts against the note, so it is the number to check before you refund or apply.

Create a credit note

1. Click New Credit Note.
2. Fill in the header: Issue date (required), Number (Auto-generated, default prefix CN-), Customer (required — one customer field; the name printed on the document follows the customer you pick), Project, Currency. There is no separate "customer name" box to keep in sync.
3. Optional Reference Number — for example the original invoice number or the return authorisation.
4. Add the lines. For each line enter the item or description, Qty, Original Price (the price before discount) and Discount % (0–100), the Tax code and the revenue account to reverse. The credit amount is the original price less the discount, applied once. When you reopen a saved credit note, the price and percentage come back exactly as you entered them.
5. Optional Document Discount — Before Tax, Excl. tax / Incl. tax, Notes, attachments.
6. If the credit note is linked to an invoice that was partly settled from a legacy retainer, you choose Restore allocations (give that amount back to the retainer) or Ignore allocations.
7. Click Save Draft or Save & Post.

The form shows the receivable account the credit will post to, taken from your account defaults (or from the linked invoice's AR account).

Post a credit note

On a draft, click Post and confirm "Post this credit note? A journal entry will be created." The status becomes Unapplied and the full total is available as credit.

Posting is refused when the date is missing, there is no customer, a linked invoice belongs to another customer ("Linked invoice must belong to the same customer."), or the total is zero or negative ("Cannot post a credit note with zero or negative total.").

Credit notes do not have Unpost; once posted, you apply, refund or void them.

Apply a credit note to invoices

You apply credit from the credit note's own page.

1. Open a posted credit note with credit remaining (Unapplied or Partially Applied).
2. Click Apply Credit in the action bar. The Apply Credit page opens and shows Credit Remaining.
3. Choose the Invoice No. — only the same customer's posted invoices with an open balance (Unpaid, Partially Paid, Overdue) are listed with their date and remaining balance.
4. The Amount fills with the invoice's remaining balance; lower it if you are applying part of the credit. It cannot exceed the invoice balance ("Amount exceeds invoice remaining balance.") or the remaining credit ("Amount exceeds available credit.").
5. Set the Allocation Date (defaults to today). It must be in an open accounting period and cannot be earlier than the credit note's date or the invoice's date ("Application cannot precede the credit or invoice date.").
6. Click Apply Credit and confirm: "This credit will be allocated to the selected invoice and its outstanding balance updated."

Repeat for more invoices. The credit note's status moves to Partially Applied or Fully Applied, and each invoice shows the credit under Credits Applied with a lower Balance Due.

The invoice and the credit note must be in the same currency ("Select a posted invoice in the same organization and currency as this credit."). The invoice's Balance Due, its status, the Open Invoices report and the overdue marker all take applied credit into account from the allocation date.

Applying credit is an allocation only: it does not create a new journal entry in your base currency, because the credit note already reduced Accounts Receivable when it was posted. The one exception is a foreign-currency credit applied to a foreign-currency invoice: if the credit's original base value differs from the invoice's base value for the same amount, SolaCount posts a small journal (source Realized FX on credit allocation) that moves the difference between Accounts Receivable and your realized exchange gain or loss account. Unapply reverses that journal too. See Multi-currency.

Unapply a credit note

To undo an allocation (for example it went to the wrong invoice):

1. Open the credit note. The Allocations table lists each invoice, amount and date.
2. Click Unapply on the row and confirm "Remove this allocation?"

The credit returns to the note and the invoice's balance goes back up. You need the Credit notes → Unapply permission; void credit notes have no Unapply button.

Refund a credit note

If the customer wants money back instead of a credit, go to Sales → Payments & Credits → Refund Receipts → New Refund Receipt and pick this credit note in Link to Credit Note. See Refund receipts. Only a posted refund reduces Credit Remaining; drafts do not. The status changes as soon as the refund is posted: Refunded when the refund takes the whole remaining credit and nothing was applied to an invoice, otherwise Partially Applied or Fully Applied. If you void the refund, the credit comes back and the status is worked out again straight away (a fully refunded note returns to Unapplied). The Refund history table on the credit note's page lists each refund with its Refund Number, Date, Amount and Status, and links to it.

The Record a payment action on a credit note (which opens a customer payment for the same customer) is only offered while the note still has credit — not on drafts, void notes, or fully applied or refunded notes.

Void a credit note

Voiding reverses the credit note's journal entry and marks it Void.

1. Click Void and confirm: "Void this credit note? A reversing entry will be created and balances will be updated. This cannot be undone."

Rules:

• Unapply first. A credit note applied to invoices cannot be voided ("Credit note is applied to invoices — remove allocations first", or "Unapply all allocations before voiding this credit note.").
• No linked refunds. If a draft or posted refund receipt is linked, void or delete the refund first ("Refund receipts are linked to this credit note").
• A void credit note carries no credit. Its Balance Due/remaining is 0, it is not offered on the Apply Credit page or for refunds, and it does not appear as customer credit.
• An invoice that has a credit note applied cannot itself be voided until you unapply the credit note.
• Voiding is permanent: create a new credit note if you need to issue the credit again.

Delete a draft

Click Delete on a draft and confirm "Delete this credit note?" Posted notes cannot be deleted; void them.

The PDF

PDF prints the credit note with your credit-note template (see PDF templates). Besides the lines, Subtotal, Tax and Total, a customer credit note's totals show Allocated Credit, Refunded Credit and Available Credit, so the recipient sees how much of the credit has been used. Item names print as the catalog name, with the line description beneath.

Credit notes for goods and prices on SolaStock-connected invoices

When your organization is connected to SolaStock, three extra ways to create a credit note appear on a posted invoice that contains stock-managed items. They exist so that a credit never silently changes stock quantities. Each creates a draft that must be reviewed and posted like any credit note, and none of them moves goods or pays money.

A draft created this way stays bound to the invoice lines it came from, so its lines cannot be swapped for others. Review it with Review financial credit ("Financial credit reviewed against the current invoice. It remains a draft until approved and posted."), then post it. If the invoice is already paid, the posted credit stays on the customer's account as an unapplied credit and no refund is made automatically — apply it to another invoice or refund it. More detail is in Invoice dispatch and SolaStock fulfilment.

Worked example (UAE, 5% VAT)

Al Noor Trading LLC returns one office chair from invoice INV-1042 (sold at AED 750 + VAT; cost AED 450).

Return of one chair at full price

Posting creates:

The restocking lines appear only for inventory items tracked in SolaCount; when SolaStock is connected, the return is linked through Link Stock source. If your organization posts discounts gross, a discount on the note is posted to the sales discount account instead of reducing revenue directly.

Applying it. INV-1042 had AED 3,400 outstanding. You apply AED 787.50: the invoice balance becomes AED 2,612.50 and the credit note is Fully Applied. No further journal entry is made.

With a discount on the line. If instead you credit the chair at 10% off (Original Price 750, Discount % 10), the credit is AED 675.00 + AED 33.75 VAT = AED 708.75. The discount is applied once.

A price concession on a paid invoice. Gulf Star Trading bought 20 filing cabinets at AED 400 + 5% VAT (AED 8,400.00) and paid in full. A week later you agree a AED 50 discount per cabinet. Credit note CN-00045: 20 × AED 50 = AED 1,000.00 + AED 50.00 VAT = AED 1,050.00.

The invoice is already paid, so there is nothing to apply the credit to. The customer now has AED 1,050.00 credit on account. You can leave it for their next invoice (Apply Credit later), or pay it back with a refund receipt (Dr Accounts Receivable 1,050.00 / Cr Bank 1,050.00). Their statement shows the credit note as a credit, then the refund as a charge, ending at zero.

Effect on A/R aging and VAT

• Posting the credit note lowers the customer's receivable balance and the output VAT for the period (it is reported as a VAT adjustment on sales in the VAT return).
• A/R aging is invoice-based: the invoice's aging only drops when you apply the credit to it. An unapplied credit note sits as a credit on the customer's account (visible in customer balance reports) but does not reduce any aging bucket.
• Unapplying puts the amount back into the invoice's aging bucket. Voiding an unapplied note restores the receivable and VAT.

Permissions

Owner, Manager and Accountant have all of these by default. If approvals cover credit notes, posting, applying, unapplying and voiding need a current approval.

Tips

• Put the original invoice number in Reference Number so the trail is obvious on the PDF.
• Use Original Price + Discount % for partial credits; don't pre-discount the price yourself.
• Apply credit before chasing the customer — otherwise the invoice still looks overdue.

Related

• Invoices · Refund receipts · Customer advance payments
• Customers · Taxes and VAT · Reports