Credit Memo
A credit memo formally reduces the amount a customer owes.
A credit memo (credit note) documents a reduction to a previously issued invoice — for returns, over-billing, or agreed discounts. It references the original invoice and can be applied as a refund, an account credit, or a deduction from a future invoice. Credit memos keep both parties' books accurate.
Example
The supplier issues a $200 credit memo for goods returned damaged, referencing invoice INV-330.
Related terms
Frequently asked questions
Credit memo vs refund — which do I issue?
Issue a credit memo to formally reduce what is owed; if you return cash, that payment settles the credit memo. Many businesses issue the memo first and then process the refund against it.
Do credit memos affect tax?
Yes — a credit memo reduces taxable revenue, so it must be reported in the correct tax period. Keep credit memos in their own numbering sequence for clean reporting.
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