Credit memos: overview

A credit memo is a document used for notifying clients that their outstanding invoice balance has been reduced or that they are being refunded. Credit is given to clients in favor or exchange for any task or activity. If a client has a credit with you, it is a liability and you need to refund or adjust that.

Core provides a feature wherein you can issue credits to the clients and either apply them to their invoices (affecting your accounts receivable) or pay the liability (affecting your accounts payable). You can also issue credits to refund their retainers. Credit Memos in Core can be used to facilitate two basic functions:

  • Enter project credits: You can create a credit memo for a project, post it to the
    relevant account and later pay this liability to the client.
  • Refund retainers: You can create a credit memo for a client to refund a retainer.

From the accounting perspective, credit memos can affect both A/R and A/P. On one hand, they debit and decrease your income account; on the other hand they credit and increase your A/P. When applying credits to the invoices via the Payments screen, it debits or increases your expense account and credits or decreases your A/R account.

For detailed tasks, please read the Core Help.

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