Understanding Credit Memos
During financial transactions, you might need to provide credit to the customers for accommodating situations where goods are returned, there is a pricing dispute or where the buyer is not required to pay the full amount of the invoice. In such cases, you can issue a Credit Memo to store the credit balance and offset it against a transaction.
A Credit Memo is a legal document that states the credit balance. The Credit Memos can be issued to counterbalance current invoices or apply to future invoices.
Note: You can create a Credit Memo only when you have already invoiced
your customer. Also when issuing a credit memo against an invoice, you must ensure that you
issue it for the same amount or amount lower than the total amount of all the invoices in
the billing schedule for an asset.
Let us take a couple of scenarios to understand the concept of Credit Memos.
