Credit Memo and Debit Nemo in AR and AP

What is the difference between Credit Memo and Debit Memo in AR and AP?

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Parakram

  • Apr 19th, 2016
 

AR:
In AR Debit Memo is Positive, which means organization is going to receive more money on a particular transaction which might be raised because they want to add freight charge or any other additional charges which are not taken into account when AR invoice are raised.
Sign of Credit memo is Negative in AR, meaning Receivable balance of organization is going to reduce. For example customer has return goods, instead of giving refund you can give a credit memo which he can use while paying this or any other invoice
AP:
In AP, Debit and Credit Memos are negative, means it is going to reduce you payable balance.
You can return goods because of defects and raise a debit memo and apply to AP invoice which will reduce your liability.
Let say if there was some mistake in AP Invoice amount and supply want to correct it, He will raise a credit memo which again reduce your liability.
Hope this helps.
--Parakram

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