Confused on 'Credit memo''Debit memo''Credit/Debit'....

[Former Member]

Hi Experts,

I found i am confused on Credit memo/Debit memo or Credit/Debit in SD. And read few articles and found more confused...

I read below 2 articles regarding the 'Credit' and 'Debit', seems what they said are not match each other....this confused me...

Article A:

"A transaction that reduces Amounts Receivable from a customer is a credit memo. For eg. The customer could return damaged goods. A debit memo is a transaction that reduces Amounts Payable to a vendor because; you send damaged goods back to your vendor."

Article B:

"Suppose a simple sales transaction like an invoice is being made, then the system needs to identify the revenue account it should credit and the cash or customer account it should debit."

My understanding from Article A is:

For Return damaged goods:

Credit memo reduces Amounts Receivable from Customer.

Debit memo reduces Amounts Payable to a Vendor.

My understanding from Article B is:

After the goods is sold to customers:

Normally the invoice is raised to the customer, then revenue account(Our company side?) should credit(means reduces?? if according to Article A)

what i thinking is that after the goods sold to customers, our revenue account should be increased, right, why here use 'Credit'????

Hope kindly help me, thank you very much!

[Former Member]

Hi,

All the notes what you have mentioned will talk about Accounting entries adjustment in the ledger book.

Simple terms:

when Payment to customer - Credit memo invoice will be raised.

when Payment from customer - Debit memo invoice will be raised.

NOte: In accounting, debit & credit calculations will be based on different transactions and also based on 3 basic rules of account like nominal a/c, real account and personal account.

[Former Member]

Hi Hoo Laa,

Your statements are absolutely right.

Suppose we area a seller and our customer is a buyer.

We sold the goods to customer and due to some reason customer return these goods (Bad quality etc), suppose before returning the goods we have already billed the customer

Now upon returning the goods, this is our responsbility to credited the customer account.

Just opposite in the debit memo, we have sold the goods 100$ per piece. Now after selling the goods, we and customer are agreed that the price should be 120$ per piece. Now we have to debited the customer account for 20$ per piece.

Hope it clarify your doubt.

Regards,

MT