Damaged stock returns process

I have followed the Purchase Returns doc but there’s one piece I don’t understand properly (I am not an accountant, so please bear with me).

We normally pay in advance for goods we buy, so our process is

  1. Sales Order/Proforma
  2. Payment (in advance)
  3. Invoice
  4. Receipt/Delivery

I received 11 items on an initial delivery - I created a receipt for all 11.
One was damaged, so I did “Make Purchase Return” as per the doc, and created the -1 items on the return receipt.
I am not 100% sure if this is right, or if I should have only created the receipt for 10 - but the 11-1 shows the actual reality flow of things more accurately, so seems preferrable.
The supplier gave us a credit note for the value of the returned item, but I don’t know how to capture that part correctly.

In particular, I am not sure if this should be captured as a Debit Note or a Credit Note (on my side)

Any tips welcomed. :slight_smile: