A credit note after payment does not by itself refund the customer. Record the approved credit, review the GST adjustment and separately track whether the amount is refunded or applied to a later invoice. Link every step to the original sale. Otherwise, the company can reduce revenue while leaving an unexplained customer credit or making the same refund twice.

Accounting records, calculator and glasses on a desk
Illustrative photograph by Cht Gsml.

Establish the reason for the credit

Keep evidence of the returned goods, agreed price reduction, service cancellation or other commercial reason. Obtain the appropriate approval before issuing the credit. IRAS’s invoicing guidance sets out circumstances and information requirements for credit notes. A request from a customer is not always evidence that the company has accepted the proposed reduction.

Link the original invoice

Record the original invoice reference, credit-note reference, amount and tax component. IRAS generally expects the original tax-invoice number and date to be shown; where identification is not possible, retain the alternative documentary evidence required by its guidance. Check the currency and tax treatment instead of simply copying the amount of a bank refund.

Keep the GST timing separate from cash timing

IRAS generally places the credit-note adjustment in the GST accounting period in which the credit note is issued, subject to its stated exceptions and conditions. The cash refund may occur later. Ask the accountant to review those conditions before the return is finalised. Do not assume the refund date determines the tax adjustment or that a prior-period correction is always required.

Illustration: a fully paid invoice is partly credited

A customer has paid an invoice in full. The company later agrees a S$300 reduction, including any applicable tax component. The credit note creates a customer credit. If the company refunds S$300, match that payment to the credit. If the customer agrees to apply it to a later invoice, retain the agreement and allocation. Do not record both a refund and a future allocation against the same S$300.

Reconcile three records

  1. Sales record: the original invoice and approved credit.
  2. Customer account: payment, credit and remaining balance.
  3. Bank record: refund, if any, and its approval.

Then reconcile the GST adjustment to the return support. Investigate any residual difference rather than posting an unexplained write-off.

What to retain

Keep the commercial approval, credit note, original invoice, customer instructions and settlement evidence. For background, see GST filing questions, SME bookkeeping and the business recordkeeping guide.

Official guidance: IRAS credit-note requirements and adjustments.

Help with your company records

For accounting and bookkeeping support, contact Raffles Corporate Services at [email protected] or WhatsApp +65 8501 7133. Tell us which records or transactions need attention so we can discuss the relevant next steps.