Credit Note vs Debit Note: What They Are and How to Issue Them

Once you send an approved e-invoice to a customer, you cannot simply edit or delete it the way you would an internal document. Any change to the invoice amount after approval is made through a separate official document: a credit note to reduce the amount, or a debit note to increase it. This keeps the original invoice intact and leaves a clear trail for every adjustment, satisfying both your auditor and the Zakat, Tax and Customs Authority (ZATCA).

This guide explains what a credit note and a debit note are, the difference between them, when to issue each, and how to manage them inside an e-invoicing environment without cancelling the invoice. The focus is practical: how using these documents correctly gives you accurate records, tax compliance, and a clean audit trail.

Last updated: 21 July 2026

What are credit notes and debit notes?

A credit note and a debit note are official accounting documents used to adjust the value of an invoice already issued. The first reduces the amount owed by the customer; the second increases it. Both link to the original invoice without cancelling it, which keeps your records accurate and your transactions sound within any integrated e-invoicing system.

What is a credit note?

A credit note is a document a business issues to a customer to notify them that the value of a previous invoice has been reduced. In other words, it is the seller’s acknowledgement that the customer no longer owes the full amount stated on the original invoice.

Common reasons to issue a credit note:

• Sales returns: when a customer returns purchased goods, a credit note records the return and reduces the amount they owe.
• Post-invoice discount: if a volume or early-payment discount is agreed after the invoice was issued, the amount is adjusted with a credit note.
• Correcting an overcharge: when a higher price or wrong quantity was billed, the difference is corrected with a credit note instead of cancelling the invoice.
• Damaged or non-conforming goods: if the product arrives damaged or off-spec, the customer is compensated for part or all of the value with a credit note.

Accounting impact: a credit note reduces accounts receivable (customers) and, in return, increases accounts such as sales returns or discounts allowed, which lower net revenue. It stays linked to the original invoice without cancelling it, a link that is essential for compliance and for tracking adjustments.

What is a debit note?

A debit note is a document a business issues to a customer to notify them of an increase in the amount they owe, or to record an additional liability. It is the opposite of a credit note: instead of reducing the amount, it increases the customer’s financial obligation to the seller.

In the past, debit notes in many systems were limited to purchases (supplier debit notes). Today, sales also have their own standalone debit note, issued against an approved sales invoice to increase the amount owed by the customer. The details are below.

Common reasons to issue a debit note:

• Additional charges: fees not included in the original invoice, such as late shipping, special packaging, or services delivered after issuance.
• Increase in invoice value: when the billed amount was lower than it should have been due to a pricing error or an under-counted delivered quantity.
• Agreed price increase: when a price rise is agreed after the invoice is approved, the increase is documented with a debit note.
• Tax adjustment: when the value-added tax on a prior transaction needs to be adjusted upward.

Sales debit notes in Qoyod: what’s new?

Qoyod has launched a sales debit notes module, so you can now issue a debit note linked to an approved sales invoice to document an additional amount owed by the customer. This note is issued after the sales invoice is approved and is used in three main cases: extra quantities delivered to the customer, an agreed price increase, or additional fees and costs.

Here are its key characteristics as they work inside Qoyod:

• Links to one sales invoice: each debit note is tied to a single approved sales invoice and inherits its customer, location, and currency.
• Processed as e-invoice document type 383: a simplified tax invoice for individuals, and a clearance invoice for commercial and government customers via the Fatoora platform.
• Automatic journal entries: on approval it debits accounts receivable by the note total including tax, and credits sales and VAT per line item, while the original invoice is tagged as debited.
• Read-only after approval: an approved note cannot be deleted at registered establishments; any error is corrected through a credit note, exactly as with invoices.

For the step-by-step walkthrough inside the system, see the guide on how to issue a sales debit note in Qoyod in the knowledge base.

Accounting impact: a debit note increases the customer’s accounts receivable and, in return, credits sales revenue and value-added tax per line item. It stays linked to the original invoice, adjusting its value upward without cancelling it, preserving transparency, adjustment tracking, and tax compliance.

Debit note vs credit note: the difference

To understand both documents fully, it helps to grasp the core differences. The table below summarizes them:

Handling notes in e-invoicing instead of cancelling the invoice

In an e-invoicing environment, an approved invoice is neither cancelled nor edited directly. Any change in value is made through a linked credit or debit note. This principle keeps the original invoice intact and makes every adjustment traceable for both the auditor and the authority.

Steps to issue an electronic credit note

You must follow the regulatory requirements when issuing a credit note. ZATCA requires the note to link directly to the original e-invoice, carry a clear reference to its unique number, and be issued in the same electronic format via the Fatoora platform. Inside an accounting system such as Qoyod, the logical steps are:

1. Choose the option to create a credit note from the sales menu.
2. Select the original invoice so the note links to it automatically.
3. State the reason for issuance (return, discount, error correction).
4. Enter the amount and quantity, accounting for their effect on VAT.
5. Review the details, then save and approve so the note is issued in the required format.

Steps to issue a sales debit note

A sales debit note is created from the details of an approved sales invoice or from the notes list. You specify the increase line and amount, the note links to the invoice automatically and inherits the customer data, and once approved it becomes read-only. The full step-by-step walkthrough with screenshots is available in the guide on issuing a sales debit note in Qoyod.

Accounting treatment of notes

Each note has a clear journal entry. Below are two examples of credit note entries for a return and a discount:

For a sales debit note, the entry is reversed: accounts receivable is debited by the note total including tax, and sales and VAT are credited per line item. When your e-invoicing system is connected to your accounting system, these entries are generated automatically on approval, saving accountant time and reducing human error.

Why an approved invoice cannot be cancelled, and how that helps your business

Preventing you from editing or deleting an invoice after approval may look like an annoying restriction at first, but it actually protects your business. Once an invoice is sent to the Fatoora platform, it becomes an official document the authority has recorded. If the system allowed you to change it later, your financial records would lose their credibility with any auditor or regulator.

This is exactly where credit and debit notes help. Instead of changing a number inside an old invoice, you issue a new document that records the adjustment, its reason, and its date. The result is three direct benefits:

• A clear audit trail: the auditor sees the original invoice and its adjustment as separate documents, and trusts your numbers without questions.
• Protection from violations: issuing through an approved note keeps you from correcting invoices in non-compliant ways that could draw remarks from the authority.
• A clearer customer relationship: the customer receives an official document explaining why the amount rose or fell, reducing disputes over balances.

How notes affect your VAT return

A note’s impact does not stop at the customer balance; it extends to your VAT return. A credit note reduces net taxable sales and therefore reduces the VAT due for the period. Conversely, a sales debit note increases taxable sales and raises the net tax due. Each note appears in the sales section of the return, and it must be issued in the correct period so your return accurately reflects your transactions.

Common mistakes and how to avoid them

Although e-invoicing has simplified many processes, handling notes is not free of recurring mistakes. Here are the most common ones:

• Not linking the note to the original invoice: the biggest mistake; every note must clearly link to the invoice it adjusts.
• Errors in value or quantity: entering a wrong amount or quantity.
• Confusing the two notes: issuing a credit note instead of a debit note, or vice versa, confuses the accounting entries.
• Miscalculating tax: ignoring the note’s effect on VAT.
• Delayed issuance: not issuing the note as soon as the reason occurs distorts report accuracy.

To avoid these: double-check every note before approval, rely on a system that links notes to invoices automatically, limit issuance rights to trained staff, and reconcile your records regularly.

Tips for staying compliant with the authority

Compliance with tax rules matters when handling notes. Keep the following in mind:

• Understand local requirements: confirm ZATCA’s requirements for issuing and receiving notes within e-invoicing.
• Use the approved format: issue notes in the approved electronic format via the Fatoora platform.
• Sequential numbering: notes must carry sequential, non-editable numbers.
• Record keeping: keep secure electronic copies of notes and invoices for the statutory period.
• Internal review: periodically verify that all notes were issued and processed per regulations.

Being ZATCA Phase 2 compliant and having a Fatoora integration helps you meet these requirements automatically, with no manual burden.

How Qoyod helps you manage credit and debit notes

Qoyod turns note handling from an error-prone manual process into controlled, compliant steps. Here is what it gives you in practice:

• Issue the note straight from the invoice: create a credit or debit note from the approved invoice, so it links automatically and inherits the customer, location, and currency, a link that is essential for compliance.
• Automatic journal entries: on approval, the note generates the required entries and updates customer and sales balances instantly, saving hours of manual entry.
• ZATCA-compliant sales debit note: a standalone module that processes the note as e-invoice document type 383 via the Fatoora platform, with separate permissions (view, create, approve, delete) and a customizable numbering prefix.
• Clean audit trail: an approved note becomes read-only, and any error is corrected through a credit note, so you get a clear trail for every adjustment instead of cancelling invoices.
• Optional inventory impact: a per-line switch on the sales note deducts quantity on approval for tracked products, keeping inventory aligned with reality.

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A look at creating a credit note inside Qoyod

In practice, if your customer wants to return a product, you have two options after creating the credit note: refund the money in cash or via bank, or allocate the note’s value to unpaid invoices to reduce the customer’s balance. A note can be applied across several invoices until its value is fully used.

Credit note options include: view, print, download PDF, allocate the note to an unpaid invoice, refund, and unallocate when needed. For the full steps with screenshots, see the knowledge base guide, or try the process yourself inside Qoyod accounting software.

You can also quickly estimate the tax impact on a note’s value with the VAT calculator.

Conclusion

Credit notes and debit notes are the tools that keep your records accurate when invoice values change after approval, instead of resorting to cancelling the invoice. With Qoyod’s support for sales debit notes and their automatic linking to journal entries and the Fatoora platform, you can now document every increase or reduction with full compliance and a clear trail.

To see how Qoyod simplifies issuing notes and managing your e-invoices, start the 14-day free trial and discover the difference yourself.