Returns and credit notes

When a sale must be reduced — goods returned, a price agreed wrong, a quantity invoiced in error — the correction is a credit note, never an edit to the posted invoice (1.6). Raise it against the customer, line by line, saying plainly in its notes why it exists. You may allocate the note to the invoice it credits; on posting, the allocated amounts reduce what that invoice is still owed, and any unallocated remainder stands as credit on the customer's account against future invoices. The note unwinds the sale's tax line by line, following the same customer and product tax position as the original document. If the goods themselves come back onto your shelves, that is a stock event as well as a money event — the credit note settles the money; your warehouse records the physical return in Inventory (Chapter 5).