WHAT IS THE DIFFERENCE BETWEEN A CREDIT MEMO AND A DEBIT MEMO?
A credit memo is the piece of paper issued by the seller to inform a buyer that a credit has been posted to the buyer’s account. This credit memo is recorded as a credit to accounts receivable on the seller’s books and is recorded as a debit to accounts payable on the buyer’s books. Remember that what is accounts receivable to the seller is accounts payable to the buyer. So what is a debit memo? A debit memo is usually a type of correspondence device. It is a piece of paper issued by the buyer to inform the seller how much the buyer plans to reduce its accounts payable balance when making a return or asking for an allowance. The buyer may use this form to record an entry, but many companies wait until they receive a credit memo from the seller before recording the transaction, just in case the seller disagrees and the buyer later has to change the dollar amount of the previous entry.
