What is a Credit memo

In this post we all will understand in detail "what is a credit memo". 

What is a credit memo in general?

Credit memo is one of the types of invoice, which is issued by supplier in order to reduce the buyer’s liability. So, in short credit memo is issued by a supplier to a buyer in order to reduce buyer’s liability.

Let’s understand credit memo with an example.

Suppose company ABC has purchased 10 items form XYZ. Now ABC is buyer here and XYZ is supplier. ABC has received 8 correct items and 2 items as defective Item. ABC is liable to pay for 8 Item’s only.

In this case supplier XYZ will send a negative invoice of 2 items reducing the liability of buyer XYZ.

A credit memo sometimes classified as an internal credit memo, in such cases we don't send any copies to the buyer. When we have to write off the customer outstanding balance we use this type of approach.

A credit memo sometimes used as an alternate term to "credit memorandum". Hence sometimes it is also referred as “Credit memorandum.

Sometimes credit memo also referred as credit note.

Credit memo|What is a credit memo|Credit memo in detial