Credit notes and debit notes: when to issue which, with examples
Written by the Lejar team4 min read
A credit note reduces what a customer owes on an invoice you have already issued; a debit note increases it. They exist so you can correct an invoice without deleting it: the original stays in your books, and the note records the adjustment with its own number and a reference to the invoice it corrects.
When do you issue a credit note?
- Goods came back: the customer returned part or all of an order you invoiced.
- You overcharged: a wrong price, a wrong quantity, or an item that should not have been billed.
- You agreed a reduction after invoicing: a goodwill discount or a settlement of a dispute.
- The invoiced work was cancelled before it was paid.
When do you issue a debit note?
When the customer owes more than the invoice said: you undercharged, or costs were agreed after the invoice went out, such as additional delivery or an extension of scope. In practice buyers also send debit notes the other way, to tell a supplier they expect a credit; the supplier’s credit note is what actually adjusts the books on both sides.
Why not just edit or delete the invoice?
Because invoice numbering must stay sequential with no gaps and no reused numbers. Deleting an invoice leaves a hole an auditor will ask about; quietly editing one breaks the copy your customer already holds. A note keeps the original intact and records the correction as its own numbered document, which is what lets your books, your SST return, and your e-invoice submissions reconcile line by line.
Credit note, debit note, refund note: the MyInvois trio
| Document | What it does | Does money move? |
|---|---|---|
| Credit note | Reduces the amount of an earlier e-invoice | No, it adjusts the balance owed |
| Debit note | Increases the amount of an earlier e-invoice | No, it adds to the balance owed |
| Refund note | Records money paid back to the buyer | Yes, cash is returned |
All three are e-invoice document types in LHDN’s MyInvois system, and each one references the original validated e-invoice it corrects. If your business is in scope for e-invoicing, a correction is not just an internal bookkeeping entry: the note itself is submitted to MyInvois like the invoice was.
A worked example
| Line | Amount |
|---|---|
| Invoice INV-2026-0104: 10 units at RM530 | RM5,300.00 |
| Units returned by the customer | 2 |
| Credit note CN-2026-0031: 2 units at RM530 | (RM1,060.00) |
| Balance the customer owes | RM4,240.00 |
In the books, the credit note reduces revenue and trade receivables by RM1,060, and if the invoice charged SST, the tax lines adjust with it. The customer pays the net RM4,240, and both sides’ records show the original sale, the return, and the reason.
What goes on a credit or debit note?
- Its own sequential number, in its own series, separate from your invoice series.
- The date it was issued.
- Your business details and the customer’s, as on the original invoice.
- The number of the invoice it corrects.
- The lines being adjusted, with quantities and amounts, and the tax adjustment if the original charged SST.
- The reason for the adjustment.
How does Lejar handle credit and debit notes?
Issue a credit or debit note from the invoice itself and Lejar prefills the lines for you to trim, numbers the note in its own series, and posts the double entry. MyInvois e-invoicing is live and free on every plan: from the posted note, submit it to LHDN with Lejar as your appointed intermediary, referencing the original e-invoice, and the submission status is resolved automatically after that. Refund notes for money returned work the same way.
Frequently asked questions
What is the difference between a credit note and a refund note?
A credit note adjusts what the customer owes; no money moves. A refund note records money actually paid back, for example returning payment the customer already made. Under MyInvois they are separate document types.
Can I just cancel an invoice instead of issuing a credit note?
If the invoice was a mistake and nothing was delivered, cancelling can be right, but never reuse its number. Once an invoice is out with the customer, or validated in MyInvois, the clean correction is a note referencing it.
Does a credit note have to reference the original invoice?
Yes. The reference is what makes the adjustment auditable, and under MyInvois e-invoicing the note carries the original e-invoice reference as part of the document.
Do credit and debit notes affect SST?
When the original invoice charged SST, the note adjusts the same tax lines, and the adjustment carries through to your SST position. See the SST-02 guide for how the return is put together.
Can a buyer issue a debit note?
Commercially yes: a buyer can send a debit note telling a supplier they expect a credit for returned goods or an overcharge. The supplier’s own credit note is what adjusts the invoice on record.