• EH Lim

Should I use a credit note or cancel the transactions?

You have two options, credit note and cancel the transaction, to reverse an entry in MoneyWorks. Which method is better or rather when to use them?


Credit note


A credit note (a.k.a. Adjustment Note) is a document, usually for returns of goods or adjustments to past invoices.


Assuming you issue an invoice to a customer. Then, due to an issue with the product sold, the customer has returned the goods, and you give a credit note to the customer to offset the amount owed.


How to enter a credit note in MoneyWorks?

You prepare an invoice (from the Show menu > Transaction > Sales Invoice) and click on the Reverse button to convert the sales invoice to a credit note. The credit note shows a negative quantity and extended price.


Credit Note
Credit Note

The journal behind the sales invoice transaction:

Debit Receivable account

Credit Sales

Credit GST Output

Debit Cost of goods sold

Credit Inventory assets


And the credit note will reverse the entry by:

Debit the Sales

Debit GST Output

Credit Receivable account

Debit Inventory assets

Credit Cost of goods sold


Use the credit note to offset future invoices or the 'Send refund to debtor' function (from the command menu) if the customer has already paid the invoice.

Cancel transaction


The cancel transaction process in MoneyWorks is for reversing a wrong entry.

To cancel a transaction:

  1. Highlight the entry.

  2. Go to the command menu, adjustment, then select cancel transaction feature.


Cancel Transaction
Cancel Transaction

Cancel a transaction will not remove it from the database. Instead, MoneyWorks create a reverse entry to offset the original.

Assuming you recorded payment (or purchase invoice) for utility expense twice, you may use a cancel transaction method to cancel the duplicated entry.

Although cancellation does a similar reversal as the credit note, you should not use cancellation for goods return or adjustment of invoices. Let's say you use the cancel transaction method for goods returned from a customer, the journal behind the cancellation:


Debit Sales

Debit GST Output

Credit Receivable account

Debit Inventory assets

Credit Cost of goods sold


Although it looks identical to a credit note, cancellation (and the cancelled invoice) will not show in the GST report. Therefore, you should consider using a credit note instead so the sales invoice and the adjustment shown in the GST report. Also, consider using a credit note instead of cancellation if both transactions are in a different financial period or cross between two GST cycles.


You may consider adding a note (click add note button in the transaction) or a short memo in the description to indicate cancellation and wrong entry (and you may also change the transaction colour to facilitate future searching).

Those users, who understand coding, may consider adding a heading column into the transaction list with the formula:


!testflags(flags, #3)


The test flags give a value of 0 or 1.

The result '0' indicate cancellation and a '1' for a valid accounting entry.


In short, use the cancel transaction method for a wrong entry and credit note for all other reversals. Use credit note if you are confused between the two.

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