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.

https://accounting.uworld.com/cpa-review/lc/accounting-dictionary/term/credit-memo/