Credit notes

A credit note reduces what a customer owes you (a receivable credit note) or what you owe a supplier (a payable credit note). Use one whenever you need to reverse or reduce an invoice or bill after it’s been approved — to issue a refund, fix a mistake, give a discount, or accept a return.

Credit notes post to the ledger on approval, exactly reversing the original document’s revenue/expense and the receivable/payable control account.

Receivable vs payable

Pick the type when you create the credit note:

• Accounts Receivable (Invoices) — you owe the customer money back, or they owe you less. Reduces revenue and AR.
• Accounts Payable (Bills) — a supplier owes you money back, or you owe them less. Reduces expense and AP.

Receivable (customer) credit notes belong to the sales side and payable (supplier) credit notes to the purchases side: a Sales role only sees and creates customer credit notes, a Purchase role only supplier ones, and the New Credit Note form starts on the type you can create. See Roles & permissions.

The credit note workflow

DRAFT ──Submit──▶ SUBMITTED ──Approve──▶ APPROVED ──fully applied/refunded──▶ ALLOCATED
                                              │                                  │
                          VOIDED ◀──Void──────────────────────────────────────┘

Status	Meaning
Draft	Saved, not posted
Submitted	Awaiting approval
Approved	Posted; carries a Balance Remaining to be spent
Allocated	Fully used up (applied to documents or refunded)
Voided	Cancelled; reversal posted and any allocations released

The key difference from invoices: an approved credit note carries a balance remaining. You “spend” that balance in two ways — allocate it to outstanding documents, or issue a refund.

Two ways to create one

Applied (from an existing invoice or bill)

Open an approved (but unpaid) invoice or bill and click Create Credit Note. AccountFUN pre-fills the contact, currency, reference, lines and — for a customer invoice — its settlement currency and rate, and offers a Create & Apply button that approves the credit note and allocates it to the source document in one step. This is the fastest path for a clean refund of a specific document.

Standalone

Create one from Credit Notes → New Credit Note, pick the type and contact, add your own lines, and approve it. Allocate it later (see below).

Spending an approved credit note

With an approved credit note that has a balance remaining, you have two actions:

Allocate to invoices/bills

Click Allocate to open the allocation dialog. It lists the contact’s outstanding, same-currency invoices (for receivable CNs) or bills (for payable CNs). Tick documents and enter amounts until you’ve used up the credit (or as much as you want). Each target document’s balance drops accordingly; a fully-paid document moves to Paid.

Currency matching

Allocations only target documents in the same currency as the credit note. For cross-currency situations, use a refund instead.

If the credit note and an invoice both settle in the same settlement currency but at different rates, the row shows Clears with … of credit — the amount of credit that clears that invoice in full, by its settlement value. See Settlement currency below.

Give / Receive a refund

Give Refund (receivable) or Receive Refund (payable) settles the credit in cash. Pick the bank account, date, and amount (defaults to the full balance remaining). A payment journal entry posts and the credit note’s balance drops. A fully-refunded credit note moves to Allocated.

You can refund in a different currency from the credit note — pick the Currency and confirm the exchange rate. Any difference between the cash paid and the credit used is booked as a realized FX gain or loss.

Settlement currency

A customer (receivable) credit note can be shown to the customer in a settlement currency, just like an invoice — see the Settlement currency guide.

• Where it’s set — the Settles in field on the credit note form. A credit note created from an invoice copies the invoice’s settlement currency and its rate, so the credit matches the invoice’s settlement amounts exactly. A standalone credit note starts with the customer’s default.
• Changing it — the Settlement line on the credit note page has a Change button (any status except Voided). A system rate is fixed when the credit note is approved.
• What the customer sees — the PDF, email and online page show every amount in the settlement currency only, with no exchange rate or original currency. The credit note page shows the settlement Total and Balance Remaining under the usual figures.

Applying a settlement-currency credit

When the credit note and the invoice settle in the same currency at different rates, the credit is applied by its settlement value, so the customer’s figures always agree. In the Allocate dialog the invoice row shows Clears with … of credit — that amount (filled in for you when you tick the row) clears the invoice in full.

The two documents’ ledger amounts then differ slightly; AccountFUN books the difference as a realized FX gain or loss automatically. The credit note’s Allocation History shows the credit used.

Refunding in the settlement currency

In Give Refund, choose the settlement currency as the Currency: the amount defaults to the settlement balance remaining and the rate to the credit note’s settlement rate, so a full refund uses up the whole credit.

Worked example: a partial refund

You billed Acme Co INV-0014 for $1,925 but agreed to knock $425 off after a dispute.

1. Open INV-0014 → Create Credit Note. It pre-fills Acme Co for $1,925.
2. Edit the line down to $425 (or replace the lines with a single Goodwill adjustment line at $425).
3. Create & Apply. Credit note CN-0003 is approved and allocated to INV-0014 in one step.
4. INV-0014’s balance drops from $1,925 to $1,500 (still awaiting payment). CN-0003 is Allocated (balance remaining $0).

If instead Acme had already paid and you owed them the $425 back, you’d use Give Refund on the approved credit note to send the cash and post it through your bank account.

Worked example: a credit in the customer’s settlement currency

Northwind (books in HKD) has an invoice to Blue Harbor for HKD 891.39, shown to Blue Harbor as EUR 100.00 (rate EUR/HKD 8.9139). Separately, Northwind issued Blue Harbor a standalone credit note for HKD 1,000.00, shown as EUR 100.00 at its own rate (EUR/HKD 10.0000).

1. Open the credit note and click Allocate.
2. Tick the invoice. The row says Clears with HK$999.99 of credit; the amount fills in as 1,000.00 — the whole credit, because what would be left over is less than a cent.
3. Click Allocate to 1 invoice. The invoice is Paid (EUR 100.00 cleared) and the credit note is Allocated.
4. In the books, HKD 1,000.00 of credit cleared an HKD 891.39 invoice; the HKD 108.61 difference is posted to Realized FX Gain/Loss.