AccPilotCredit note vs debit note: a Malaysian guide
What a credit note and a debit note are, who issues each, worked RM examples of how they change a supplier balance, and how to file them with the invoice.
A supplier’s statement says the client owes RM5,650. The client’s ledger says RM6,250. The staff spend half an hour on it before they find the reason: a RM600 credit note for returned goods, issued in March, filed by the client together with the delivery order in the storeroom. Nobody told the bookkeeper it existed.
Credit notes and debit notes are small pieces of paper that change real balances. They arrive separately from the invoice they belong to, often weeks later, and they are the documents most likely to go missing between the client and the firm. When one is lost, the client overpays a supplier or under-collects from a customer.
What a credit note is
A credit note is issued by the seller to reduce the amount of an invoice already issued. The usual reasons:
- goods returned or rejected as faulty
- a short delivery, billed in full
- an overcharge or a wrong price on the invoice
- a discount or rebate agreed after the invoice went out
LHDN’s e-Invoice Guideline (version 4.6, published 7 December 2025) describes it the same way: a credit note is issued by suppliers “to correct errors, apply discounts, or account for returns” on an earlier invoice, reducing its value, where no money is returned to the buyer. When money does go back, the guideline uses a separate document, a refund note.
What a debit note is
A debit note adds an amount to an invoice already issued. The supplier undercharged, forgot the delivery fee, or the customer asked for extra work after the invoice went out. The e-Invoice Guideline describes it as a document “issued to indicate additional charges on a previously issued e-Invoice”.
There is one local habit that causes confusion. Some buyers raise their own “debit note” to a supplier when they return goods, as a claim: we are debiting your account with us by RM600. That is the buyer’s internal document. The supplier normally answers it with a credit note. For the books, the supplier’s credit note is the one to post; the buyer’s debit note is the supporting paper behind the claim. If a client only has its own debit note and no credit note from the supplier, confirm with the supplier that they have accepted it before reducing the balance.
| Credit note | Debit note | |
|---|---|---|
| Issued by | The seller | The seller (sometimes a buyer, as a claim) |
| Effect on the invoice | Reduces it | Increases it |
| Effect on what the buyer owes | Down | Up |
| Common reasons | Returns, short delivery, overcharge, discount | Undercharge, extra charges, added work |
| Must refer to | The original invoice number | The original invoice number |
How they change a supplier balance: a worked example
A made-up client, Kedai Elektrik Sinar, buys stock from one supplier. Its creditor ledger for that supplier in March 2026:
- 1 March: balance brought forward from February, RM3,200.00.
- 3 March: invoice INV-5501, 40 units at RM150.00 = RM6,000.00.
- 10 March: four units are faulty and go back. The supplier issues credit note CN-0207 for RM600.00 (4 × RM150.00), quoting INV-5501.
- 15 March: the supplier forgot to bill delivery. It issues debit note DN-0045 for RM250.00, also quoting INV-5501.
- 25 March: the client pays RM3,200.00 for February’s balance.
| Creditor ledger, March 2026 | RM |
|---|---|
| Balance brought forward, 1 March | 3,200.00 |
| Add: invoice INV-5501 | 6,000.00 |
| Less: credit note CN-0207 | (600.00) |
| Add: debit note DN-0045 | 250.00 |
| Less: payment, 25 March | (3,200.00) |
| Balance owing, 31 March | 5,650.00 |
Now leave out the credit note, as in the opening story. The ledger shows RM6,250.00. If the client pays from its own ledger, it pays RM600.00 too much. That is why the monthly supplier statement reconciliation in handling supplier invoices matters: an unrecorded credit note is one of the first differences it catches.
The entries, from both sides
For the buyer (the client receiving the notes):
- Supplier’s credit note: debit the supplier’s account (creditor), credit purchases or purchase returns. RM600.00 each side.
- Supplier’s debit note: debit the expense it relates to, such as carriage inwards or purchases, credit the supplier’s account. RM250.00 each side.
For the seller (the client issuing the notes to its own customers):
- Credit note issued: debit sales returns (or sales), credit the customer’s account (debtor).
- Debit note issued: debit the customer’s account, credit sales or the income it relates to.
If the original invoice carried SST, the note should adjust the tax too. Under section 23 of both the Sales Tax Act 2018 and the Service Tax Act 2018, a registered person that issues or receives credit or debit notes makes the deduction or addition of tax in its returns, and the notes must contain the prescribed particulars. Section 24 of both Acts lists debit notes and credit notes among the records to keep for 7 years. The prescribed details sit in the regulations; check the current version with the client’s tax agent or the Customs SST portal. More in SST record keeping.
Credit and debit notes under e-Invoice
For clients that issue e-invoices, LHDN’s guideline gives a short window to cancel a wrong e-invoice: the supplier can cancel within 72 hours of validation. After that, any change has to go through a new e-invoice, issued as a credit note, debit note or refund note. The guideline also says the note should clearly reference the original invoice “to ease reconciliation”.
Not every client is in scope. Businesses below RM3 million annual turnover are exempt from 1 September 2026; see which clients the e-invoice exemption covers. Exempt clients will still receive e-invoice credit notes from larger suppliers; post them like paper ones.
How to file them with the original invoice
The rule is the same as for every purchase document: the note lives with the invoice it changes.
- Check the reference. Every credit or debit note should quote the original invoice number. If it doesn’t, ask the supplier for one that does, or write the invoice number on it yourself.
- Keep the set together. Invoice, then any credit or debit notes, then the payment. Someone looking at INV-5501 should see straight away that it was reduced by RM600 and increased by RM250.
- Post it in the right month. The note belongs to the month it was issued, not the month the client remembered to send it.
- Keep the paper. LHDN’s Public Ruling 4/2000 says original source documents should be retained where computers are used to record transactions. Notes that arrived on paper go into that month’s envelope. No glue, no A4, no photostat needed; the clear digital copy is the working copy.
- Make it findable. Search by supplier, date and amount, so a RM600 credit note from March can be pulled up in seconds when a supplier or the auditor asks. See finding one document years later.
Where AccPilot fits
Credit and debit notes come into AccPilot the same way as invoices: web upload, phone snap, email, or the upload link you send the client. AccPilot reads the vendor, date, amounts, tax and line items, and marks each document Ready or Check with the reason, so a note that needs a closer look is flagged rather than buried. Your staff review and export one clean Excel that imports into your accounting software, and every document stays searchable by vendor, date and amount for 7 years.
What stays with your firm: whether a credit note was actually agreed, which invoice it belongs to when the supplier left it off, and how the tax adjustment is treated.
To see it on your clients’ own invoices and notes, book a free demo.