They allow sellers to account for returns, corrections, overpayments, and other situations requiring balances to be decreased in the books. In summary, credit memos are important documents for properly adjusting buyer accounts after invoices have been issued. Correction of errors that negatively impacted the account.Loan principal payments credited to the account.Interest earned on deposit account balances.Bank credit memos increase the available balance for a customer rather than reducing the amount owed.įor example, banks may issue credit memos for: A seller credits a buyer $1000 for promotional discounts that were promised but not applied on the original invoices.īanks also use credit memos but in a different manner than trade transactions.A customer receives a $250 credit memo after overpaying their last invoice from a supplier.A wholesaler provides a $500 credit memo to a retailer who was incorrectly overcharged on a previous invoice. ![]() This properly accounts for the return in their books.
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