A credit note or credit memo is a commercial document, utilized in business transactions to indicate a reduction in the amount owed by a customer or owed to a supplier.
If the customer returns goods to the seller, the invoice previously issued is cancelled, in part or as a whole, with a credit note.
[1] Credit notes act as a source document for the sales return journal.
A credit note lists the products, quantities, and agreed prices for products or services the seller provided the buyer but the buyer returned or did not receive.
In respect of the previously issued invoice, a Credit Memo will reduce or eliminate the amount the buyer has to pay.