What is a credit memo? When is it used?
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
What is a credit memo? When is it used?
Credit memo also known as credit memorandum or credit note
Credit memo is issued by the seller of the goods and service to the purchaser of goods and service
At the time of sales return or if further discount is allowed to customer then seller of goods issued credit memo
By issuing credit memo , seller credit the purchaser account
Credit note is also issued when customer is overcharged
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