Lesson 12 of 20

Debit notes and credit notes: returns in TallyPrime

Goods come back and bills get corrected. A credit note reduces what a customer owes you; a debit note reduces what you owe a supplier.

Rates here are assumed. The examples use GST at 18% (CGST 9% + SGST 9%, or IGST 18%) only to show the entries. Actual rates depend on the goods or service and change by notification. For rates and return rules see the official sites gst.gov.in and cbic-gst.gov.in, or ask your accountant.

Which is which

	Credit Note	Debit Note
Key	Alt+F6	Alt+F5
Used by	The seller	The buyer
Typical reason	Customer returns goods; price charged was too high	Goods returned to supplier; supplier overcharged
Party's account is	Credited (customer owes less)	Debited (we owe the supplier less)
Effect	Reduces sales and output tax; stock comes back	Reduces purchases and input tax; stock goes out

The names come from the party's account: a credit note credits the customer; a debit note debits the supplier.

Switching them on

If Alt+F6 and Alt+F5 do nothing, the voucher types are not active. Press F10 on the voucher screen to list all voucher types and choose Credit Note or Debit Note; Tally will offer to activate it.

Sales return: Credit Note

City Book Depot returns 10 reams of A4 paper from the sale of 8 April (rate ₹300, GST assumed 18%). Value ₹3,000; CGST ₹270; SGST ₹270; total ₹3,540.

Vouchers > Alt+F6.
Date; then the original invoice number and date when asked. The link to the original invoice is needed for tax reporting.
Party: City Book Depot. Sales ledger: Sales A/c.
Item: A4 paper, 10 reams at ₹300. Tax ledgers as in the sale.
Bill-wise: choose Agst Ref against the original invoice. Save.

Credit Note
	Ledger	Debit (₹)	Credit (₹)
Dr	Sales A/c (A4 paper, 10 reams @ 300)	3,000
Dr	Output CGST	270
Dr	Output SGST	270
Cr	City Book Depot		3,540

The customer now owes ₹42,480 − ₹3,540 = ₹38,940, and 10 reams are back in stock.

Purchase return: Debit Note

Shanti Traders returns 20 damaged reams to Mohan Paper Mart from the purchase of 5 April (rate ₹250). Value ₹5,000; CGST ₹450; SGST ₹450; total ₹5,900.

Vouchers > Alt+F5.
Date; original supplier invoice number and date.
Party: Mohan Paper Mart. Purchase ledger: Purchase A/c.
Item: A4 paper, 20 reams at ₹250. Tax ledgers as in the purchase.
Agst Ref against the supplier's bill. Save.

Debit Note
	Ledger	Debit (₹)	Credit (₹)
Dr	Mohan Paper Mart	5,900
Cr	Purchase A/c (A4 paper, 20 reams @ 250)		5,000
Cr	Input CGST		450
Cr	Input SGST		450

We now owe the supplier ₹59,000 − ₹5,900 = ₹53,100, and stock falls by 20 reams.

Price corrections without goods moving

If the customer was charged ₹300 a ream when ₹290 was agreed, a credit note for the difference is passed in accounting invoice mode (no stock movement): 120 reams × ₹10 = ₹1,200 plus tax. Likewise a debit note when a supplier overcharged.

Why not just change the original voucher?

Once an invoice has been issued, and especially once it has been reported in a tax return, altering it breaks the trail. The return is a separate event on a later date, with its own document. Notes keep both events visible: the sale, and the return against it.

Under GST

Credit and debit notes are reported in GST returns and reduce or increase the tax liability, subject to conditions and time limits in the law. Tally includes them in its GST reports when they are linked to the original invoice. For the conditions and time limits, rely on your accountant and the GST portal, not on this page.

Checks

The party's ledger shows the reduced balance.
Stock Summary shows the quantity adjusted.
The note is tagged against the right bill in the Outstandings report.
The paper credit or debit note, and the goods return slip, are filed with the voucher number.

Common mistakes

Using a debit note for a sales return because "the customer's goods came in". Think of the party's balance, not the goods.
Entering the return at today's selling price instead of the rate on the original invoice.
Leaving out the original invoice reference.
Forgetting the tax lines, so that only the value is reversed.

Next: stock items and units.

Questions learners ask

Which voucher is used for sales return in Tally?

A Credit Note, opened with Alt+F6. It credits the customer and reduces sales.

Which voucher is used for purchase return?

A Debit Note, opened with Alt+F5. It debits the supplier and reduces purchases.

Why are Alt+F5 and Alt+F6 not working?

The Debit Note and Credit Note voucher types may not be active. Press F10 on the voucher screen, choose the type, and activate it.

All lessons

What TallyPrime is Create a company Groups and ledgers Create ledgers Voucher types Contra voucher Payment voucher Receipt voucher Journal voucher Purchase voucher Sales voucher Stock items and units GST set-up GST entries Bank reconciliation Reports Backup and restore Common errors 30 day plan

Shortcut keys Group quiz Practice exercise Glossary

An independent learning site. Tally and TallyPrime are trademarks of Tally Solutions Private Limited. This site is not connected with, approved by or paid by Tally Solutions, and uses none of its logos, screens or course material. Keys and menu paths were checked against Tally's own help site on 12 November 2026; the software changes with each release, so if your screen differs, follow Tally's help (press Ctrl+F1). Tax treatment in the examples is for learning only: ask your accountant.