A credit note is a document issued to summarise are duction in charges on an invoice. It is typically issued when a customer returns defective goods, receives inadequate service, or when an invoice was issued with errors. The credit note adjusts the customer’s outstanding balance accordingly, often resulting in a refund or reduced liability.

Example: An electronics retailer sells a television for £600 but later finds it to be defective. The customer returns the TV and requests a refund. The retailer issues a credit note for £600, reducing the customer's outstanding invoice balance. If the customer has already paid, the retailer refunds the amount or uses the credit note against future purchases.