credit Credit (from Latin verb ''credit'', meaning "one believes") is the trust which allows one party to provide money or resources to another party wherein the second party does not reimburse the first party immediately (thereby generating a debt) ...

note or credit memo is a commercial document issued by a

seller Sales are activities related to selling or the number of goods sold in a given targeted time period. The delivery of a service for a cost is also considered a sale. The seller, or the provider of the goods or services, completes a sale in r ...

to a

buyer Procurement is the method of discovering and agreeing to terms and purchasing goods, services, or other works from an external source, often with the use of a tendering or competitive bidding process. When a government agency buys goods or serv ...

. Credit notes act as a

source document A source document is a document in which data collected for a clinical trial is first recorded. This data is usually later entered in the case report form A case report form (or CRF) is a paper or electronic questionnaire specifically used in clin ...

for the sales return journal. In other words, the credit note is evidence of the reduction in sales. A credit memo, a contraction of the term "credit memorandum", is evidence of a reduction in the amount a

owes a

under an earlier invoice. It can also be a document from a

bank A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital markets. Because ...

to a

depositor A deposit account is a bank account maintained by a financial institution in which a customer can deposit and withdraw money. Deposit accounts can be savings accounts, current accounts or any of several other types of accounts explained below. ...

to indicate the depositor's balance is being in the event other than a deposit, such as the collection by the bank of the depositor's note receivable.

Features

A credit note lists the products, quantities, and agreed prices for products or services the seller provided the buyer but the buyer returned or did not receive. It may be issued in the case of damaged goods, errors or allowances. In respect of the previously issued invoice, a Credit Memo will reduce or eliminate the amount the buyer has to pay. ''Note:'' A Credit Memo is not to be substituted as a formal document. The Credit Memo rarely contains PO #, Date, Billing Address, Shipping Address, Terms of Payment, List of products with quantities and prices. Usually, it references the original invoice and sometimes states the reason for the issue.

Uses

* To allow the buyer to purchase an item or service from that seller on a future date, i.e. a

gift card A gift card also known as gift certificate in North America, or gift voucher or gift token in the UK is a prepaid stored-value money card, usually issued by a retailer or bank, to be used as an alternative to cash for purchases within a parti ...

or store card credit. Credit notes may be issued by a seller as a goodwill gesture to a buyer who wishes to return previously purchased merchandise (instead of cash repayment) in circumstances where the original sales agreement did not include an explicit refund policy for returned items. In such circumstances, a credit note of value equal to the price of the returned item is usually issued, allowing the buyer to exchange their purchase for other items available with the sale.

References

{{Authority control Credit Accounting source documents

Features

Uses

See also

References