A credit note is a document that reverses some or all of an invoice, issued after the fact rather than by editing or deleting the original. It exists so the paper trail stays intact: the invoice still shows what was originally billed, and the credit note shows exactly what was taken back and why — instead of a silently edited invoice that no longer matches whatever the client's own records show.
Common reasons to issue one: an overcharge caught after the invoice was sent, a returned item or cancelled line, a pricing error, or a goodwill adjustment for a client dispute. In every case, something was billed that should not have been billed at that amount, and the credit note is the record of correcting it.
A credit note is not a refund. The credit note is paperwork — it records that money is owed back, or that a future invoice should be reduced. Whether that turns into an actual bank transfer, a store credit applied to the next invoice, or something else is a separate step the credit note doesn't perform by itself.
A credit note carries the same structure as the invoice it credits — line items, amounts, currency — with its total shown as negative, and it references the specific invoice number it reverses. It can credit the whole invoice or only some of its lines, but it can never come to more than the invoice actually billed, even across several partial credit notes issued against the same invoice.
A credit note is also not the same document as a receipt, even though both follow an invoice: a receipt confirms money that came in; a credit note reverses money that was asked for. Neither one is a request for payment, and neither should carry a due date the way the original invoice did.
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