A credit memo typically does what to the amount a customer owes?

A credit memo typically does what to the amount a customer owes?

• A. Increases the amount owed
• B. Decreases the amount owed
• C. Has no effect on balance
• D. Records a new invoice

Answer: (B)

A credit memo reduces what a customer owes. When you issue one, you’re documenting a reduction in the customer’s liability—typically due to a return, an overcharge, or an adjustment. The credit is applied against the customer’s accounts receivable, so the outstanding balance goes down. You can apply that credit to an existing invoice or leave it on the customer’s account for future charges, or issue a refund if needed. It does not create a new invoice and it does not increase the amount owed.

A credit memo reduces what a customer owes. When you issue one, you’re documenting a reduction in the customer’s liability—typically due to a return, an overcharge, or an adjustment. The credit is applied against the customer’s accounts receivable, so the outstanding balance goes down. You can apply that credit to an existing invoice or leave it on the customer’s account for future charges, or issue a refund if needed. It does not create a new invoice and it does not increase the amount owed.