Credit Memo

Accounting Dictionary

Credit Memo

A credit memo is a short way of saying credit memorandum. It is a document verifying that the seller has reduced the buyer’s bill.

If John returned $36 worth of goods, he would be issued a credit memo for $36. He would journalize that by debiting Accounts Payable and crediting Purchase Returns. If John was using perpetual inventory he would make the credit to merchandise inventory.

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