Credit Note

A credit note is a document that reduces, cancels, or corrects an earlier customer invoice.

Businesses use credit notes when a customer returns goods, receives a discount after invoicing, is overcharged, cancels part of an order, or needs a refund or account credit.

In accounting software, the credit note keeps the original invoice history intact while showing the later adjustment. That is usually cleaner than deleting or rewriting the original invoice.

Where Credit Note Appears

You will usually see credit notes in:

customer invoice history
accounts receivable
refunds and overpayments
GST and BAS review
customer statements
audit trail checks

For GST-registered Australian businesses, a credit note may also act as an adjustment note when it changes the GST outcome of an earlier taxable sale.

How Credit Note Works In Practice

A credit note is linked to the customer and usually to the original invoice. It reduces the amount the customer owes, creates a credit to apply to another invoice, or supports a refund.

If GST was included in the original invoice, the credit note may also reduce the GST that needs to be reported, depending on the timing and the type of adjustment.

Simple Example

A customer is invoiced $550 for a service, including $50 GST. The business later agrees to a $110 refund because part of the work was cancelled.

The business issues a $110 credit note. The customer’s balance falls by $110, sales are reduced, and the GST records can show the adjustment rather than pretending the original invoice never existed.

Why Credit Note Matters

Credit notes keep customer balances honest. Without them, paid and unpaid invoices can be confusing, refunds can be missed, and GST reports may not match the real transaction history.

The ATO explains that some GST changes need an adjustment note, and that businesses generally need to keep records supporting their GST adjustments.

Easy Way To Remember It

A credit note is the paper trail for reducing an invoice after it has already been issued.

How Gimbla Can Help

Gimbla lets you record credit notes, apply them to invoices, issue refunds, and keep the customer, GST, and bank records connected.

Helpful Gimbla Guides

In Short

A credit note records a reduction to an earlier invoice. It helps keep customer balances, refunds, sales, GST, and audit history aligned.