If you take the cancellation invoice, it is, so to speak, a copy of the original invoice . Only the error is corrected and the original amount to be paid is credited to the customer.
How do I create a cancellation invoice?
You can easily create a cancellation invoice by observing all the points described above. Therefore, here is a brief summary of how you have to create a cancellation invoice . To be on the safe side, it is also recommended to use a cancellation invoice template .
- mark the cancellation invoice accordingly (correction invoice, invoice correction, cancellation invoice)
- give the cancellation invoice a separate invoice number
- reference the original invoice
- make sure that all positions and their data are identical to the original invoice
- At the end of the cancellation invoice, you have to add a minus to the invoice amount and the tax amounts
Cancellation invoice if the incoming payment has been booked
Of course, it can happen that your customer does not even notice an error on the invoice and transfers the invoice amount. If this incoming payment appears in your accounting, you are of course not allowed to simply change the invoice. In this case, a cancellation invoice is inevitable . Specifically, this means that you or your accounting department have to neutralize the old invoice . For this purpose, an invoice is written with a negative amount and is referred to as a credit note . With this cancellation invoice, your accounting is correct and balanced.
Cancellation invoice if no incoming payment has been posted
If your customer has not yet paid the invoice, you can edit the incorrect invoice under the same invoice number and reissue the invoice. If you do not want this, you can also send your customer a correction document . You can use these to correct the incorrect information.
With the invalid invoice, you AND your customer must file this document together with the correction document. It is important that it is clear from this which error had to be corrected.
A cancellation invoice is not a credit
If you consider a cancellation invoice from the accounting point of view, then it is a credit. But be careful, because in practice it looks different and you are not allowed to call the cancellation invoice a credit. This is justified in two different ways.
- If it is a real credit, you can, for example, credit your supplier with an amount for which he has not even billed. Credits are mainly used in the area of commission payments. Here one also likes to speak of a reverse calculation.
- If you create a cancellation invoice, you credit a customer with an amount. This credit only serves to cancel an incorrect invoice. However, this process must be traceable and verifiable at all times and a cancellation invoice is therefore created.
Error devil: “credit” instead of “cancellation”
If you mistakenly designate a cancellation invoice as a credit, this can have consequences for the recipient . In this case, the tax office can deny him the VAT deduction. In addition, the assessment base for sales tax is not reduced by this amount. In plain language, this means that the incorrect designation “credit” entails tax disadvantages for the recipient . Mistakes like this can quickly put you at risk of losing a good customer.
The cancellation invoice has the same meaning as the correction invoice or the invoice correction. The cancellation invoice is simply intended to correct an incorrect invoice retrospectively. The cancellation invoice must be created because it is necessary for correct bookkeeping. But be careful, because the cancellation invoice must under no circumstances be referred to as a credit. As with any other invoice, mandatory information must also be observed with the cancellation invoice.
What is a credit?
Legally, a credit is the billing of services or deliveries. According to § 14 UStG, a credit is a so-called reverse invoice, also known as a billing credit. A cancellation invoice is often incorrectly referred to as a credit note, it is purely legal, but incorrect.
What is a cancellation invoice?
The cancellation invoice is intended to correct incorrect invoices. Terms such as correction invoice or invoice correction are very often used as a synonym. From a purely commercial point of view, it is also referred to as a credit. From a legal point of view, however, this is not correct.
What mandatory information must a cancellation invoice contain?
A cancellation invoice must contain the same mandatory information as it is on a conventional invoice. Rather, the cancellation invoice is a copy of the original invoice that contains all of the data. In order to be able to make a clear assignment for a cancellation invoice, it is given a separate invoice number.