The buyer might return a few or all purchased items to the seller.The seller will inform the buyer how much extra he has paid in the document, and he can keep the count during the next transaction. Usually, it comes into the picture if the client has paid more or less than the actual price of the goods or services taken. It is a document prepared to adjust the errors made in the sales invoice, which has already been processed and sent to the customer.
The memo will be the opposite if the prices of products shipped to Company B have increased. In both scenarios, company A will send a Credit Memo to company B stating that B should reduce the amount they owe A, the price of products should be the amount mentioned, and company A will reduce the same amount in their amount receivables. The company would have charged as per past prices to B, and B would have cleared the account or not. It may be due to a decrease in raw material cost, a decrease in overheads, and so on. The new prices are lower than the past prices. The sales team of A has received a new price list of products. A has dispatched a certain quantity of goods to the B. These two companies have a track record and have been doing business for some time now. Example of Credit MemoĬompany A is a manufacturing company that provides goods to company B. The seller can also easily track back the discounted product in the case of the credit memo. The reduction of price in the memo will be specified at a product level and is easy for the transaction.
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