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Credit Memos

Credit Memo Software — CRA-Ready Credit Notes

Issue a credit note GL, taxes, and invoice balance adjust automatically

CRA ETA s.232 ready. Full tax breakdown per component (GST/HST/PST/QST). Apply to paid or unpaid invoices.

Issue full or partial credit notes that automatically reverse GL entries, adjust tax liabilities, and update invoice balances. Built for CRA ETA s.232 compliance.

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What is a Credit Memo?

A credit memo reduces or cancels the amount owed on a previous invoice — with a full audit trail and automatic tax adjustment

Credit Note Basics

A credit memo (credit note) is a formal document issued to a client to reduce the amount they owe. Common reasons include returned goods, pricing errors, post-sale discounts, or partially completed work. The credit note references the original invoice and creates a paper trail for both parties.

CRA ETA s.232 Requirements

When a credit note adjusts GST/HST, the CRA requires it to include the supplier's name and registration number, a reference to the original invoice, the credit amount, and the tax adjustment. iBill includes all ETA s.232 fields automatically on every credit note you issue.

GL & Tax Impact

Each credit note posts a reversing journal entry: DR Revenue (GL 4000) and DR Tax Liability (GL 2100/2200/2300) / CR Credits Payable (GL 2450). Tax liabilities are adjusted per component — GST, HST, PST, and QST — so your CRA tax reports stay accurate.

Credit Memo Features

Everything you need to issue, track, and report on credit notes — with full CRA compliance and audit trail

CRA ETA s.232 Ready

Every credit note includes the supplier name, GST/HST registration number, original invoice reference, credit amount, and tax adjustment amount — all the fields required by CRA ETA s.232 for tax adjustment notes.

Per-Component Tax Breakdown

Each credit note calculates the exact tax adjustment for every component — GST, HST, PST, and QST — matching the original invoice's tax rates. Tax liabilities in GL 2100, 2200, and 2300 are reversed proportionally so your general ledger stays accurate.

Automatic GL Reversal

When you issue a credit note, iBill posts the reversing double-entry journal entries automatically: DR Revenue (4000) + DR Tax Liability (2100/2200/2300), CR Credits Payable (2450). No manual journal entries required.

Apply to Paid or Unpaid Invoices

Issue credit notes against both paid and unpaid invoices. For unpaid invoices, the credit reduces the outstanding balance. For paid invoices, the credit note creates a refund obligation tracked in Credits Payable (GL 2450) — the correct accounting treatment under cash-basis accounting.

Void vs. Credit Note Workflow

iBill supports both voiding and credit notes with clear guidance on when to use each. Void an invoice when it should never have been issued (unpaid only). Issue a credit note when adjusting a valid invoice — partial credits, returns, or corrections on paid invoices. Both create a full audit trail.

Credit Note Register & Audit Trail

Every credit note is logged in an append-only audit trail with SHA-256 document hashing. The credit note register provides a complete list of all credits issued — with date, original invoice reference, amount, tax breakdown, and status. Export to CSV for your accountant or CRA audit defense via financial statements.

Issue CRA-Ready Credit Notes

Automatic GL reversal, per-component tax breakdown, and full audit trail. No spreadsheets, no manual journal entries.

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Credit Memo Example

A sample credit note showing the automatic tax breakdown and GL impact

Credit Note CN-202603-001

Against Invoice INV-202602-015 — Issued March 7, 2026

CREDIT DETAILS
Reason — Partial return of consulting services
Credit Subtotal
($2,000.00)
HST Adjustment (13%)
($260.00)
Total Credit
($2,260.00)
GL JOURNAL ENTRY (Auto-Posted)
DR 4000 — Revenue
$2,000.00
DR 2100 — HST Collected
$260.00
CR 2450 — Credits Payable
($2,260.00)

ETA s.232 compliance: This credit note includes the supplier name, GST/HST registration number, original invoice reference (INV-202602-015), the credit amount ($2,000), and the tax adjustment ($260 HST). iBill generates all required fields automatically.

Void vs. Credit Note — When to Use Each

Both are valid invoice correction methods. The right choice depends on whether the invoice is paid and the nature of the adjustment.

Criteria Void Invoice Credit Note
When to use Invoice should never have been issued Adjusting a valid invoice (partial or full)
Paid invoices Not allowed Allowed
Partial adjustment No — full cancel only Yes — any amount
GL impact Reverses all original JEs Posts new reversing JE (DR Revenue + Tax / CR Credits Payable)
Original invoice Marked as voided Remains on record with credit note linked
Audit trail Void reason logged, original preserved Credit note number, reason, tax breakdown logged
CRA requirement Mandatory void reason ETA s.232 tax adjustment note

Credit Memo FAQs

What is a credit memo?
A credit memo (also called a credit note) is a document issued by a seller to reduce the amount a buyer owes on a previous invoice. It is used when goods are returned, a pricing error occurred, or a discount is applied after invoicing. In Canada, a credit note that adjusts GST/HST must comply with CRA ETA s.232 requirements.
When do you need to issue a credit note?
You need to issue a credit note when: a client returns goods or rejects a service, you overbilled a client, a pricing error was made on the original invoice, you agree to a post-sale discount, or work was partially completed. If the original invoice included GST/HST, the credit note must include a tax adjustment per CRA ETA s.232.
What does the CRA require on a credit note (ETA s.232)?
Under ETA s.232, a credit note that adjusts GST/HST must include: the words "credit note" or "adjustment note", the supplier's name and GST/HST registration number, the date issued, the original invoice reference, the amount of the credit, and the GST/HST adjustment amount. iBill includes all required fields automatically on every credit note you issue.
How does iBill handle tax on credit notes?
iBill calculates the tax breakdown on every credit note automatically. Each credit note shows the subtotal credit, plus the per-component tax adjustment — GST, HST, PST, or QST — matching the original invoice's tax rates. The GL entries reverse the corresponding tax liability accounts (2100 GST/HST, 2200 PST, 2300 QST) so your books stay accurate.
What is the difference between voiding an invoice and issuing a credit note?
Voiding cancels an entire invoice and reverses all its GL entries — it is used when the invoice should never have been issued. A credit note is a partial or full adjustment to a valid invoice — the original invoice remains on record, and the credit note creates a new document with its own number. For paid invoices, you must use a credit note (you cannot void a paid invoice). iBill supports both workflows with full audit trail.

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Related Resources

Double-Entry Accounting Full GL system CRA Tax Reports GST/HST/QST reporting General Ledger Journal entries & GL Financial Statements Balance sheet & P&L Cash Basis Accounting CRA-accepted method

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