What is a credit note?

A credit note is indeed a document that indicates a refund or reduction in the amount a customer owes to a seller. When a customer returns goods or when there is an overcharge, the seller issues a credit note, which effectively reduces the customer's outstanding balance. This document serves as a formal acknowledgment that the seller is applying a credit to the customer's account for the specified amount, meaning the customer either owes less on their existing invoice or may not owe anything at all, depending on the circumstances.

The other choices describe different financial documents and transactions but do not accurately capture the purpose of a credit note. A document recording a purchase of goods refers to an invoice or receipt rather than a credit note. A note from a bank confirming a transaction is more aligned with bank statements or transaction confirmations and does not reflect debt reduction between a seller and a customer. Lastly, a document outlining payment terms for future invoices deals more with the conditions under which payment will be made rather than the acknowledgment of a refund or credit.