Credit Note Template

A credit note reduces an invoice you already sent: credited lines + tax reversed + any freight credited = total credit. The filled sample below credits $317.99 against a $4,731.35 invoice (6.72%), leaving $4,413.36.

Total credit $317.99 6.72% of INV-2026-0412 · Partial credit

Credited lines$295.80

Tax reversed$22.19

Freight and other$0.00

Invoice after credit$4,413.36

3 lines credited against INV-2026-0412. $4,413.36 of the $4,731.35 invoice stands after this credit.

Start from

Figures update as you edit lines, tax or the invoice total. Jump to the document.

Live template

Edit the sample credit note

Every field feeds the document. The credit type and the invoice total after this credit fill in from the lines, the tax rate and the original invoice total.

Totals calculate in your browser, and drafts save on this device only.

Sample US credit note shown. Overwrite it, or use Clear draft to start blank.

Fields marked are required for a complete document. Everything else is optional.

Credit note number

Credit note date

Currency Use the currency of the original invoice.

Original invoice number

Original invoice date

Original invoice total, including tax (optional) Used to work out how much of the invoice this credit covers and what is left.

Reason for credit

How the credit will be applied (optional)

Issued by (seller)

Seller address (optional)

Seller tax or registration number (optional)

Credited to (buyer)

Buyer address (optional)

Customer account number (optional)

Buyer's PO number (optional)

Return, RMA or claim reference (optional)

Lines being credited

Add only what you are crediting. Line credit = quantity × unit amount. For a price error, enter the overcharge per unit, not the full price.

Description of the credited item	Original invoice line	Reason	Quantity credited	Unit	Unit amount credited	Line credit	Action

Tax reversed and charges credited

Further reduction A fixed amount off the credited lines, before tax. It cannot take them below zero.

Tax entered as

Tax rate on the original invoice % Applied to the credited lines after any further reduction. Leave 0 if no tax was charged.

Tax amount reversed Used when "Fixed tax amount" is selected, for example when freight was taxed too.

Freight credited

Other charges credited

Effect on the invoice, explanation and approval

Credit type (auto) (optional) Partial, full, or over the invoice, from the total credit and the invoice total.

Invoice total after this credit (auto) (optional) Invoice total minus this credit. It does not track payments already made.

Explanation of the credit (optional)

Notes (optional)

Approved by (name) (optional)

Title or role (optional)

Approval date (optional)

Signature (optional)

Currency changes the symbol and formatting only; it does not convert amounts. Use the currency of the original invoice.

How to

How to Make a Credit Note in 8 Steps

Number and date it. Give the credit note its own number from a separate sequence, and date it the day you issue it.
Name the original invoice. Add the invoice number, its date and its total. A credit note that names no invoice cannot be matched.
Add both parties. Your business as issuer, the customer as the party credited, plus their account and PO numbers.
Pick the reason. Returned, damaged, short shipped, mispriced, discounted or cancelled. Each line can carry its own.
Credit the lines. One row per affected invoice line: the quantity credited and the amount per unit. A price error credits the overcharge only.
Reverse the tax. Enter the rate charged on the original invoice, or 0 if none was charged. The tax reversed works itself out.
Check the effect. The credit type and the invoice total after this credit fill in. A credit larger than the invoice is flagged.
Approve and send. Add the approver, then Print / Save as PDF and send it with the same reference as the invoice.

The formula: line credit = quantity × unit amount, rounded to the cent. Total credit = credited lines − further reduction + tax reversed + freight and other charges credited. Invoice after credit = original invoice total − total credit.

Credit note format

The Credit Note Format, Part by Part

These 12 parts are what an accounts payable team looks for. The template has a field for each.

Part	What goes in it	Why it matters
Title and number	"Credit Note" and a unique number, such as CN-2026-0037	One reference both sides can quote.
Issue date	The date the credit note is issued, not the sale date	Places the reduction in the right period.
Original invoice	Invoice number, invoice date and invoice total	Ties the credit to a real balance.
Seller	Name, address, tax or registration number	Shows which entity grants the credit.
Buyer	Name, address, account number, PO number	Routes the credit to the right customer account.
Reason	A category plus a written explanation	Drives approval, claims and any tax question.
Credited lines	Description, invoice line, quantity, unit amount, line credit	Makes a partial credit checkable.
Tax	Rate and amount of tax reversed, where tax was charged	Keeps the tax on the invoice and the credit in step.
Charges	Freight or other charges credited	Separates goods from delivery costs.
Total credit	Lines, less any reduction, plus tax and charges	The figure the buyer books.
Effect on the invoice	Full or partial, and the invoice total after the credit	Tells the buyer what is still payable on that invoice.
Settlement and approval	Offset, future invoice or refund; approver, date, signature	Says how the credit is used and who signed it off.

Credit note example

Credit Note Example: A Columbus, OH Supplies Order

A packaging supplier in Columbus, OH invoiced a local retailer $4,731.35 on INV-2026-0412. Three things went wrong on one delivery. This is the sample that loads in the template.

Original invoice line	Qty	Unit price	Amount
1. Corrugated shipping box, 12 x 10 x 8 in	1,200 pcs	$1.18	$1,416.00
2. Packing tape, 2 in x 110 yd	360 rolls	$2.45	$882.00
3. Poly mailer, 10 x 13 in	5,000 pcs	$0.084	$420.00
4. Kraft void-fill paper roll	40 rolls	$36.50	$1,460.00
Freight			$240.00
Sales tax on goods (7.5%, example rate)			$313.35
Invoice total			$4,731.35

Credited line	Qty	Unit amount	Line credit
Line 1, damaged	150 pcs	$1.18	$177.00
Line 2, short shipped	24 rolls	$2.45	$58.80
Line 3, pricing error	5,000 pcs	$0.012	$60.00
Credited lines			$295.80
Tax reversed (7.5% of $295.80)			$22.19
Total credit			$317.99

$317.99Total credit

6.72%Share of the invoice credited

$22.19Sales tax reversed

$4,413.36Invoice total after credit

The check: $295.80 + $22.19 = $317.99, and $4,731.35 − $317.99 = $4,413.36. The freight was not affected, so none is credited.

Switch to Cancelled order, full credit and the template credits $1,618.17 against a $1,618.17 invoice: 100.00%, a full credit. Price correction, no tax credits $258.00, or 3.73% of a $6,912.00 invoice.

Partial vs full credit

How Much of the Invoice Each Credit Covers

Different credits against the same $4,731.35 example invoice, computed with the same functions as the template. Tax is reversed at the 7.5% example rate on goods.

Credit (example)	Lines	Tax reversed	Freight	Total credit	Share	Invoice after
150 boxes damaged (line 1)	$177.00	$13.28	$0.00	$190.28	4.02%	$4,541.07
24 rolls of tape short (line 2)	$58.80	$4.41	$0.00	$63.21	1.33%	$4,668.14
Mailers overcharged $0.012 each (line 3)	$60.00	$4.50	$0.00	$64.50	1.36%	$4,666.85
The three above on one note (the sample)	$295.80	$22.19	$0.00	$317.99	6.72%	$4,413.36
All 1,200 boxes returned (line 1)	$1,416.00	$106.20	$0.00	$1,522.20	32.17%	$3,209.15
2% post-sale discount on the goods	$83.56	$6.27	$0.00	$89.83	1.89%	$4,641.52
Freight refunded, no goods credited	$0.00	$0.00	$240.00	$240.00	5.07%	$4,491.35
Whole invoice reversed	$4,178.00	$313.35	$240.00	$4,731.35	100.00%	$0.00

Credits on separate notes add up. Two credit notes against one invoice should not total more than the invoice, so keep a running figure per invoice.

Tax on a credit note

Sales Tax, VAT and GST on a Credit Note

Tax rules for credit notes are local. The template does the arithmetic; your accountant or tax authority decides the treatment.

US sales tax

In the US, sales tax is set by each state. Whether tax is refunded on a credit, and how it is reported, follows the rules of the state that taxed the sale.

UK VAT

HMRC lists what a valid VAT credit note must show, including the rate and amount of VAT credited and the original invoice number and date.

GST and VAT elsewhere

Other countries set their own rules for credit notes. Names, deadlines and required fields differ, so check with the local tax authority.

What this template does

It reverses tax at the rate you enter, on the credited lines only. If freight was taxed, switch to a fixed tax amount and enter the total tax to reverse.

Source for the UK card: HMRC, VAT guide (VAT Notice 700), section 18.2.3 "Valid credit notes", updated 25 June 2026, checked 2 October 2026. Scope: UK VAT-registered businesses.

The same HMRC section says a credit note issued without a VAT adjustment should state "This is not a credit note for VAT". Other countries set their own wording, so check locally.

Reasons for a credit note

Six Reasons to Issue a Credit Note

Goods returned

Stock came back and was received. Credit the returned quantity at the invoiced price and quote the RMA number.

Damaged in transit

Goods arrived unusable. Credit the affected units and note the delivery, so any carrier claim stays separate.

Short shipment

Fewer units arrived than were invoiced. Credit against the packing list and record both counts.

Pricing or billing error

The wrong price or tier was billed. Credit the overcharge per unit rather than reversing the whole line.

Post-sale discount or rebate

A discount agreed after invoicing. Credit it as one line and say what it covers.

Order cancelled after invoicing

Billed but never shipped. Usually a full credit: every line and the freight, with tax reversed at the invoice rate.

The template carries a reason for the whole note and one per line, so a damaged line and a mispriced line can sit on the same credit note.

Document comparison

Credit Note vs Debit Note vs Refund vs Revised Invoice

Four ways to respond when an invoice no longer matches what happened.

	Credit note	Debit note	Refund	Revised invoice
What it does	Reduces or cancels an amount already invoiced	Asks for, or records, a change to an amount owed	Moves money back to the buyer	Replaces a wrong invoice
Usually issued by	The seller	The buyer, sometimes the seller	The seller	The seller
Effect on what is owed	Goes down	Up, or a request for it to go down	Settled in cash	Replaced by a new figure
Original invoice	Stays on file, unchanged	Stays on file	Stays on file	Cancelled or voided
Use it when	The invoice was right, then something changed	You are the buyer and want the seller to act	Money has to go back	Nothing has been booked yet

Short or damaged goods often show up first on the delivery note, when the receiver counts the cartons. That count is the evidence behind a short-shipment credit.

Numbering

Credit Note Numbering Conventions

Convention	What it looks like	Why teams use it
Own sequence, own prefix	CN-2026-0037	Keeps credit notes out of the invoice sequence, so neither series has gaps.
Year segment	CN-2026-0037, then CN-2027-0001	Shows the issue year without opening the document.
Entity segment	CN-OH-2026-0037	Useful when several entities issue credits through one finance team.
Quote the invoice	CN-2026-0037 against INV-2026-0412	Matches the pair from either side without a lookup.
No reuse, no gaps	0035, 0036, 0037	A gap invites a question someone has to answer later.

Whatever pattern you pick, apply it the same way every time. The value is predictability, not the format.

Common mistakes

6 Credit Note Mistakes to Avoid

No original invoice number

A credit with only a customer name matches nothing. Put the invoice number and date on it.

Crediting a lump sum

"Credit as agreed" cannot be checked. Credit the actual lines, quantities and unit amounts.

Entering the price, not the difference

On the sample's mailers, entering the agreed price would credit $360.00 instead of the $60.00 overcharge. Credit the difference per unit.

Editing the invoice as well

A credit note plus an edited invoice counts the reduction twice. Change one document only.

Forgetting the tax

The sample's lines total $295.80, but the buyer paid tax on them too. At the invoice rate the credit is $317.99.

No settlement route

Say whether it is an offset, a future-invoice credit or a refund, or the customer waits for money that is not coming.

Excel, Word or PDF

Credit Note Template in Excel, Word or PDF?

Most credit note templates online are static files. Each format has a trade-off.

Excel (.xlsx)

Formulas can total the credit, but they break when rows are copied or inserted.

Word (.docx)

Easy to brand. Every amount and total is typed by hand, so they drift.

Static PDF

Tidy, but adding a credited line means redrawing the table.

This browser template

Lines, tax reversed and the invoice total after credit stay in step. Save as PDF gives you the file.

To get a file, press Print / Save as PDF and choose "Save as PDF" as the printer. The preview is exactly what prints.

Tools for the Rest of the Order File

Commercial invoice templateThe export invoice a credit note may later correct.Proforma invoice templateA priced quote before any invoice exists.Delivery note templateOrdered vs delivered, so a shortage is on paper before it is credited.Return rate calculatorHow many orders come back, by SKU or channel.

All free toolsCalculators and templates for ecommerce operations.FulfillmentHow Locad stores, picks and packs ecommerce orders.WarehousingReceiving, storage and stock counts across locations.

FAQ

Credit Note Questions

A credit note is a document a seller issues to reduce or cancel an invoice it already sent. It names the original invoice, lists what is being credited and why, and states the total credit. The original invoice stays on file unchanged.

Give it a number and date, name the original invoice, and add both parties. Pick the reason, then add one row per credited line with the quantity and amount per unit. Enter the tax rate charged on the invoice, add the approver, and print or save it as a PDF.

Yes. The template on this page opens with a filled sample. Overwrite it with your own details, check the live preview, and press Print / Save as PDF. It runs in your browser, and drafts save on this device only.

This template saves as a PDF, not as an Excel file. If your team works in spreadsheets, the format table on this page lists the parts a credit note usually carries, so you can set up the same columns in Excel.

Common reasons are goods returned, damaged in transit, short shipped, a pricing error, a post-sale discount and an order cancelled after invoicing. In the sample, 150 boxes arrived crushed, 24 rolls of tape were short and mailers were overcharged, for a total credit of $317.99.

Yes, and it usually is. Credit only the affected lines and quantities. The sample credits $317.99 against a $4,731.35 invoice, which is 6.72% of it, leaving $4,413.36.

Often, but the rules depend on the country, the state and the reason for the credit. This template reverses tax at the rate you enter, on the credited lines. Confirm the treatment with your accountant or tax authority.

It should not be. A credit note reduces one invoice, so it can at most cancel it. If the total credit comes out higher than the invoice total, the template flags it so you can check the lines.

The seller issues a credit note to lower what the buyer owes. A debit note is usually raised by the buyer to claim a reduction, or by a seller to bill an undercharge. Practice varies between trading partners.

No. A credit note changes the amount owed on paper. A refund moves money back. A credit note often comes first, then the credit is offset, applied to a future invoice or paid out as a refund.

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