If the return (adjustment) amount is greater than the customer debt, then the company owes the difference to the customer. Some auditors believe that in this case the company must charge VAT on this resulting amount.
The company creates a credit note to record the return or invoice adjustment. Then, the company creates the following documents:
- Output VAT Transaction to register the taxable amount which the company owes to the customeroutput taxable and tax amounts
- Tax Invoice to register the output VAT amount for VAT-related reports
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