What is a Debit Note?
A debit Note is a crucial document required in business-to-business transactions. This document is used from the side of both the persons in business i.e. buyer and seller. For a better understanding of the concept, we must understand it from a different point of view. Therefore, two views have been laid down below to understand the real meaning of Debit Notes.
WHEN A BUYER ISSUES A DEBIT NOTE
A buyer issues debit notes to initiate a purchase return of the goods procured on credit from the seller. Here are some situations enumerated wherein the buyer issues debit notes:
- When there are quality/defect issues in the goods received by the Buyer
- When there are calculation errors or overcharging issues or situations where excessive tax is applied
- Situations wherein suppliers fail to supply the promised goods or service on time to the buyer
- A situation when the buyer changes his mind and does not want to purchase goods and services from the seller
Illustration: X Company (Buyer) places an order for 1500 caps to Y Company (Seller) at the price of 5 AED per Cap. At the time of delivery, 250 caps were found to be damaged and not up to the mark as expected and agreed between the buyer and seller. In this situation, the buyer will issue a debit note to the seller.
WHEN THE SELLER ISSUES A DEBIT NOTE
A seller issues a debit note to inform the buyer about debt collection/obligation. The use of this note serves as a reminder for the collection of due funds. Here are some situations enumerated wherein the seller issues a debit note:
- When there is a change in the quantity of the order from the side the buyer
- To remind buyers to the collection of debts
- When there are some adjustments in invoices from the side of the seller
- When there is a sudden change or increase in the price of the goods already supplied to the seller
- When goods or services are rejected by the buyer
Illustration: X Company (Buyer) places an order for 1500 caps to Y Company (Seller) at the price of 5 AED per Cap. The said caps were delivered successfully, and the invoice was raised by the Seller of 4 AED per cap i.e. 6000AED instead of 5 AED per cap. Then later seller remembers that the price agreed between him, and the buyer was of 5 AED per cap i.e. 7500 AED. In this situation, seller will issue debit note to the buyer for making adjustment in invoice.
There is no specific definition defined for Debit Note but it can easily understand from the above-mentioned situations.
How to Draft a Debit Note?
It is very important to draft a debit note in a correct sense as in any case when dispute reaches to courts then this note works as an important piece of evidence. Therefore, it is highly important to draft the debit note in correct manner. As we know that debit note can be send from the side of both the parties, but it must bear cogent reasons for sending it for e.g., if in case buyer send the debit note to seller then he must enumerate the cogent reason for sending it to seller because the debit note comes into existence when the receiving part accepts it.
EuroMEA Legal Services has a highly qualified team of lawyers and experts which have extensive experience in drafting Debit Notes. Our law firm team with the help of accounting experts works in a highly proficient manner in order to draft the Debit Notes and secure the interest of our clients. Here are some of the key points required in drafting up of debit Note.
KEY POINTS
- Issuer Company Name and address with all details including phone number, zip code
- Date of creating Debit Note
- Details of order upon which the Debit Note is issued
- Complete details of placing or receiving order
- Terms and Conditions as specified
- Completed details of the other party to whom debit note is to send
- Complete details of invoice including cogent reasons for issuing the debit note.
- All facts to be completed while specifying the reasons for issuance of debit note
- At last details of the person issuing debit note and also the details of the person who has to receive the said note.
EuroMEA Legal Services is committed to provide best advice and legal document drafting services to our clients. Therefore, in case if you need any suggestion or help in relation the matters related to drafting of Debit Note or Credit Note you can contact us freely. Our team is fully committed towards our client to perform their duty and in delivering out the positive results.
