Business owners who operate small businesses or medium-sized enterprises receive purchase orders from their customers, provide them with purchase invoices, receive their payments, and communicate accordingly with the vendors. This proves that business owners also have to handle the accounting services and account bookkeeping tasks that their company has to deal with. Among these tasks is providing a credit memo which is a document that is sent to a client by a seller to reduce the total sum that a customer has to pay.

4+ Credit Memo Samples in PDF

1. Credit Memo Processing

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2. Credit Memo Template

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3. Vendor Credit Memo

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4. Credit Memo Invoice

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5. Credit Memo Acceptance

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What is a Credit Memo?

A credit memo or credit memorandum is a note or document that a seller of a certain product or service provides to its customers when they credit their account which also acts as a source document and one of the ways to communicate with a buyer. A credit memo can reduce the total price of an item from the previously issued sales invoice or eliminate the total amount of the item. This memo is commonly issued when a party who made a purchase will not be able to pay the entire amount he owed a seller.

How to Create a Credit Memo?

A credit memo, also known as a credit note, is a formal document that is issued by a buyer to reduce the amount that they owed to the seller which they send after an invoice has been issued. This memo is usually issued in circumstances of owed, reduce payments, and accounts payable. A credit memo can also be issued if an item is defective, wrong in size or color, price change, or if the buyer no longer wishes to continue with the purchase.

Step 1: Indicate the Business’ Basic Information

Writing the title of the document, which in this case is “Credit Memo”, the receiver will be able to understand the purpose of the document. You can download a credit memo template, and type your business name, physical address, contact information, email address, and tax identification number in the appropriate spaces provided in the template.

Step 2: Include the Customer’s Information

At the right side of the template, provide the information of your customer. You can also include any number or code you use within the company to identify your customers. Include the date when the memo is issued, its memo number, the original invoice number, and the payment terms on the left side of the template.

Step 3: Create Columns for the Credit’s Information

Create columns at the center of your template, input the quantity of each credit in the first column, the item identification number in the second column, the description of the item and the reason for the credit in the third column, and its price in the fourth column. Write the total price of the item in the fifth column. All the prices are indicated on the fifth column and write the amount at the bottom of the column and label it “Subtotal”.

Step 4: Include the Sales Tax

By multiplying the subtotal by the state’s sales tax amount, you can now calculate the sales tax for the credited items. Write the amount below the subtotal and label it “Sales Tax”. Add the subtotal and sales tax, then label the amount “Total”.

FAQs

What is the basic information included in a credit memo?

A credit memo includes basic information like the memo number and date, the seller’s contact information, the buyer’s contact information, the list of goods or services for which credit was issued, the credit amount, and the seller’s signature.

What are the reasons for issuing a credit memo?

A credit memo is issued when there are defective items like a rotten piece of equipment, the item is in the wrong size, wrong type, and inaccurate color, seller issues, changes in actual money, discount or negotiation, and the goods are rejected because of some issues.

What other details should be included in a credit memo?

Other details that a credit memo should include are the purchase order number, date of purchase, shipping address, list of items, method of payment, and the quantity of each item.

A credit memo is an accounting document that is issued by a seller to show the buyer a positive balance in their account. This document is also a tool to simplify the adjustment on your accounts after you sent an incorrect invoice. Credit memos can be issued for a number of several reasons and contain the necessary information to help sellers efficiently handle their inventory management.

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