Software: Intuit QuickBooks Desktop accounting software
Credit Memo (aka Credit Note or Adjustment Note) is an accounting document given by the seller to the buyer for goods or services returned. A refund of the credit amount can be given or offset against the future purchase.
Use the “Create Credit Memo/Refund” feature in QuickBooks to record the return of goods/services from a customer. QuickBooks gives the user an option to retain as an available credit to offset against the future purchase, give a refund immediately, or apply to an invoice when the credit memo saved. Among the three options, “Retain as an available credit” is most commonly used.
“Retain as an available credit” is use to contra the credit memo against the future purchases. Let’s say you have issued a credit memo and some invoices for a customer. When making payment, the customer can opt to apply the credit memo to the outstanding sales invoices. In the QuickBooks’ Receive Payment transaction, click the “Discount & Credit” button after you have highlighted the sales invoice and apply the credit memo to an invoice accordingly.
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