MANAGEMENT

Detailed explanation-1: -What is a Credit Memo? A credit memo is a contraction of the term “credit memorandum, ” which is a document issued by the seller of goods or services to the buyer, reducing the amount that the buyer owes to the seller under the terms of an earlier invoice.

Detailed explanation-2: -(a) A seller of merchandise issues a credit memo to indicate the amount of money that has to be paid by the buyer for purchasing goods after deducting the sales return or allowance. The buyer’s account is credited for accounts receivable, and the sales account is debited.

Detailed explanation-3: -Definition of Credit Memo One type of credit memo is issued by a seller in order to reduce the amount that a customer owes from a previously issued sales invoice. Another type of credit memo, or credit memorandum, is issued by a bank when it increases a depositor’s checking account for a certain transaction.