The sales tax amount can be determined by multiplying the subtotal amount with the state’s sales tax percentage. The tax amount applicable for the listed items should also appear in the memo. Terms of payment – The total amount owed after the credit has been applied should also be noted down together with the expected payment terms of the new subtotal and the original invoice. The memo must show the amount of credit awarded for each item and a description stating why the credit is being awarded. The memo should have an itemized list of all the products credited and the purchase price and quantity of items. List of items for which the credit was issued Also, the seller should supply the date to the memo by declaring the effective date, month, and year. Include the date of purchase as well as the date of the original invoice.
Memo template code#
Any number or code that the seller uses to identify the customer should be indicated. The buyer should also be identified by having their name and contact information. The memo should indicate the seller’s identification information, such as the business name, the seller’s contact information, for instance, mailing address, telephone number, website, email, and the seller’s tax identification number. Additionally, the number of the original invoice and the purchase order number should be provided. The credit note should have a reference number identifying the memo. These components are: Reference number (Memo number and date) Consequently, there is a universal format that is globally accepted by all industries and sectors. The details and particulars of a credit note address pertinent information of the seller’s intention. In contrast, a credit memo implies that the seller awarded the buyer a credit, which is meant to reduce the buyer’s existing outstanding balance or to reduce the buyer’s invoice quotation in the future.Įssential Information to include in a credit memoįundamentally, a credit memo will be structured like a sales invoice. On the other hand, unlike a credit memo, a refund memo means that the seller is obligated to give back all or part of the money already paid by the buyer – basically, to reimburse the buyer. A credit memo and a refund are similar because a seller can issue both to an already issued invoice, and the quoted price can either be partially or entirely reduced. Even though these documents have some similarities, they are not short of discrepancies. People will often confuse a credit memo with a refund. Also, it can be used to address customer complaints that can otherwise be sorted out by awarding credit or discounts in an easy and fast way without having them return products. Tip: A credit memo can also be utilized to identify recurring issues associated with a specified product, such as defects, insufficient packaging, etc. Bank Y can issue a credit note stating that the depositor’s account has been credited the specified amount as interest earned from their money. Company A should then reduce the same amount from their accounts receivables.Įxample 2: Bank Y has been holding a depositor’s money for a specified interest for one year under an agreement that the bank will deposit the interest earned to the depositor’s account after the twelve months. Company A should issue a credit memorandum to ask Company B to reduce their quotation by the mentioned amount. As a result, Company A has lowered its pricing of good X.
The production cost of good X has been reduced due to reduction in the cost of raw materials. They have an arrangement where Company A supplies a specified amount of good X every month. Since most jurisdictions do not allow sellers to edit invoices after they have been issued, a credit memo becomes of great importance in situations where there is a need to accommodate price changes without doing away with the initial invoice.Įxamples of a credit memo in different scenarios:Įxample 1: Company A has been in business with company B for a long. Credit memos can reduce the invoiced amount before or even after payment. This is of grave importance at the end of each reporting period (monthly, quarterly, or annually) to identify any open receivable accounts by maintaining a proper audit trail. A credit memo is kept as a record of the consequential reduction of his or her accounts receivable balance. In addition, a seller would be necessitated to reduce an already quoted price, which will be further discussed later in the article. The primary reason why a seller would be prompted to use a credit memo is when they want to offset the price they quoted for specified goods and services to a customer, such as to correct an invoice error. Credit memos are issued to serve different purposes within a business.
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