Credit Note Generator
Create a credit note, also called a credit memo, when a customer returns goods, was overcharged or is owed an agreed discount on an invoice you already sent. It names the original invoice, lists what is being credited and shows the total the customer can deduct or have refunded.
A credit note reduces or cancels an invoice you have already issued. It shows a credit note number and date, the seller and customer, the number and date of the original invoice, each item credited with quantity and price, the tax being reversed and the total credit. The customer deducts it from what they owe or gets it back as a refund.
Common uses for a credit note
- Crediting goods a customer returned
- Correcting an invoice that was overcharged
- Applying a discount or rebate agreed after invoicing
- Cancelling an invoice that was issued in error
Cedar Lane Supply Co.
415 North High Street
Columbus, OH 43215
(614) 555-0139
cedarlanesupply.com
CREDIT NOTE
06/19/2026 10:26
Credit to
Morning Ritual Café
88 East Gay Street
Columbus, OH 43215
Against invoice
| Item | Qty | Price | Total |
|---|---|---|---|
| Ceramic Mug 12oz (returned) | 6 | $8.50 | $51.00 |
| Espresso Cup (price correction) | 24 | $0.50 | $12.00 |
This credit will be deducted from your next payment or refunded on request.
What's on a credit note
These are the fields a credit note is expected to show — the same ones filled in on the sample above. For a plain-English definition of any receipt field, see the Receipt Field Dictionary.
- CREDIT NOTE heading
- The words 'Credit Note' or 'Credit Memo' at the top, so the customer's accounts team books it as a reduction, not as a new bill.
- Credit note number and date
- Its own number, and the date it is issued. Many businesses run a separate sequence, such as CN-0001, so credits never collide with invoice numbers.
- Original invoice number and date
- The invoice this credit applies to. Without it, neither side can match the credit to the debt it reduces.
- Seller and customer
- Your business details, tax or VAT number if you have one, and the customer's name and address exactly as on the original invoice.
- Items credited
- Each item or service being credited, with quantity, price and amount. Credit only what changed, not the whole invoice, unless you are cancelling it.
- Reason for the credit
- Return, damaged goods, pricing error, agreed discount. One line is enough, and it saves a phone call.
- Tax credited
- The sales tax or VAT being reversed, at the same rate the original invoice charged.
- Total credit
- The full amount credited, tax included, and whether it will be refunded or offset against the next invoice.
How to make a credit note
- Open the Credit Note template. The heading is already set to CREDIT NOTE; change it to CREDIT MEMO if you prefer the US term.
- Enter your business details and the customer under Credit to, as they appear on the original invoice.
- Add the original invoice number and date, and the reason for the credit.
- List only the items being credited, with quantity and price, and set the same tax rate the invoice used.
- Sign in with a free account to download the PDF and send it. Your first download is watermark-free.
Credit Notes: what to get right
Credit note vs. invoice vs. refund
An invoice says the customer owes you money. A credit note says they owe you less: it reduces an invoice you already issued, either in part (one returned item) or in full (an invoice sent in error). A refund is the payment that may follow. If the customer already paid, the credit note documents why you are sending money back. If they have not, they simply pay the invoice minus the credit.
Never edit or delete an invoice once it has been sent. Issue a credit note against it, so both your records and the customer's show what happened and when.
Credit note, credit memo and debit note
Credit note and credit memo are the same document. Credit note is the usual term in the UK, Europe, Australia and India; credit memo, short for credit memorandum, is more common in the US. A debit note goes the other way: it increases an invoice, for example when goods were undercharged.
What a valid credit note shows
Where VAT applies, the rules are specific. HMRC's VAT guide (opens in a new tab) says a credit note must reflect a genuine mistake, overcharge or agreed reduction and be issued within 14 days of the refund. It must show its own number and date, both parties' details, what is credited with quantity and amount, the total credited excluding VAT, the VAT rate and amount, and the number and date of the original invoice. If the credit makes no VAT adjustment, it should say 'This is not a credit note for VAT'. Outside the UK the list is a good default, because it is what any accounts team needs to match the credit.
Worked example: a return and a price correction
A supplier invoiced a café on invoice INV-1042 for mugs and espresso cups. Six mugs arrived broken, and the cups were billed at $5.25 instead of the agreed $4.75. The credit note lists:
• 6 ceramic mugs, returned damaged, at $8.50 = $51.00
• 24 espresso cups, price correction of $0.50 each = $12.00
Subtotal credited: $51.00 + $12.00 = $63.00. Sales tax at the 8% rate the invoice charged: $63.00 × 0.08 = $5.04. Total credit: $63.00 + $5.04 = $68.04. The café deducts $68.04 from what it owes on INV-1042, or, if it has already paid, the supplier refunds it.
Helpful tools & guides
Credit Note FAQ
What is a credit note?
A document a seller issues to reduce or cancel an invoice already sent, after a return, an overcharge or an agreed discount. The customer deducts the credit from what they owe, or receives it as a refund.
Is a credit note the same as a credit memo?
Yes. Credit memo is the more common name in the US; credit note is used in the UK, Europe, Australia and India. Both reduce an existing invoice.
What is the difference between a credit note and a refund?
A credit note records that the customer owes less. A refund is money paid back. If the invoice is unpaid, the credit is simply deducted; if it was paid, the credit note explains the refund that follows.
Does a credit note need the original invoice number?
Yes. Quoting the number and date of the original invoice is how both sides match the credit to the debt it reduces, and under UK VAT rules it is required.
Should a credit note show negative amounts?
Either works. Most credit notes list positive amounts under a CREDIT NOTE heading, because the heading already says the money flows back. Some accounting systems print them as negatives. What matters is that the total credit is clear.
Sources & references
The rules cited on this page, with what each one is cited for. They describe how credit note receipts are treated — they are not advice about your own situation.
- VAT guide (VAT Notice 700), section 18.2.3 — Valid credit notes (opens in a new tab)
HM Revenue & Customs · UK
A valid credit note reflects a genuine mistake, overcharge or agreed reduction, is issued within 14 days of the refund, and shows its own number and date, both parties' details, what is credited with quantities and amounts, the VAT rate and amount credited, and the number and date of the original invoice.
Sources last checked October 18, 2026. We re-verify every link monthly and update the dates above. Citing these rules is not legal or tax advice — see our editorial policy.
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