Credit Memo Template

Credit Memo Template

What Is a Credit Memo?

A Credit Memo is a document completed by the seller to reduce the amount of money owed by the client from a sales invoice that was issued earlier. The amount of money indicated in the memo can be returned to the customer or applied to the next purchase - in some cases, it eliminates the entire cost of the goods.

You can download a printable Credit Memo template through the link below.

This document is used when there is a damaged shipment, wrong order of products, or a post-invoice discount. Sometimes, the item is of the wrong color, size, or maybe the buyer has simply changed their mind before the transaction is completed. The Credit Memo serves as an adjustment for the purchaser who received incorrect, damaged, or incomplete goods. It will describe the difference between the price paid for the goods by the client and the new sale price.


Debit Memo Vs. Credit Memo

Both Credit Memos and Debit Memos are designed to correct errors on invoices and to streamline the balance due. A properly drafted memo will adjust the business checking account. Standalone memos can be completed for any invoice with a positive and negative balance.

However, unlike a Credit Memo, a Debit Memo records the amount of money the client owes from their account - consequently, the debt is increased. In banking, for instance, a Debit Memo is filled out when you have insufficient funds on your account, you owe them service charges, or you are late on your monthly loan payment. A bank Credit Memo is issued to increase the checking account of the depositor for a particular transaction, or you may earn interest on the account, and as a result, the bank issues a Credit Memo.

How to Make a Credit Memo?

Follow these steps to create a Credit Memo:

  1. Write down the name of your business, your mailing address, and federal employer identification number at the top of the memo. You may also insert the company logo and slogan along with the company details.
  2. State the number of the purchase order - it will serve as a unique memo number for your records and future inquiries.
  3. Describe the terms of payment and billing.
  4. Indicate the shipping address, type of delivery, and the name of the purchaser. You can also add the buyer's telephone number and email. If you identify your customers with codes or numbers, state the appropriate number as well.
  5. List all the items and their prices - you should create a small table, especially if the order contains multiple goods. State the quantity of each item, its identification number from your inventory, and enter the reason for the credit. Multiply the price of the goods by their quantity in order to calculate the subtotal to be paid.
  6. Compute the sales tax - multiply the total from the table by the sales tax amount in your state. Once you do that, add the result to the subtotal - you will get the total amount of money to be paid.
  7. Record the date of purchase - it will help you to keep track of inventory. A Credit Memo accounting date is significant - you will use it for compiling financial reports and income statements.
  8. Add a Credit Memo journal entry to your records. This description should include the memo number and customer's identification number.
  9. Send a copy of the memo to the buyer for their use. You can notify the customer by email or by posting the memo in the client's personal account.

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