AR Credit Memo and Accounting flow


Create a credit memo with negative line amounts for returned quantities

Select bill-to, ship-to, sold-to, and paying customer details as like invoice creation.

Complete the document and balance due will be shown with negative figures

Tools -> create accounting

1. Create draft accounting
2. create final accounting
3. create final accounting and post to GL

View accounting

Receivables account - CR
Revenue account - DR


Apply credit memo to outstanding invoices

Go to Actions menu -> Applications

Apply to invoice number - select outstanding invoices for the same customer
Installment no default to 1
Application date is set to system date
Amount applied is equivalent to credit memo full value
Balance of an invoice is shown in Balance due field
Days late, transaction class, transaction type which is applied is shown in application window

Balance due of an credit memo is reduced from (-ve) value to zero. It means credit memo is fully applied to an invoice

Once credit memo is applied to an invoice, re-create accounting

This will add two more accounting entries to the above list

Receivable account - DR
Receivable account - CR

In this instance, three accounting entries for receivables account (CR, DR, CR). Finally, receivables account is credited for customer returns

Ex: Invoice value - 100 USD

Revenue - 100 USD - CR
Receivables - 100 USD - DR


Ex: Credit memo value - 30 USD

Revenue - 30 USD - DR
Receivables - 30 USD - CR


GL account balances

Revenue - CR (100 USD), DR (30 USD) = 70 USD
Receivables - DR (30 USD), CR (100 USD) = 70 USD

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