If Credit Memo is issued by other party— (a) It shows purchase return of the goods. (b) It shows selling of the goods. (c) It shows cash purchases of the goods. (d) It shows credit purchases of the goods.
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Answer:
(a) It shows purchase return of the goods.
Explanation:
The most common type of credit memorandum (or credit memo) is issued by a seller and given to a buyer as a means to reduce the amount that the buyer owes.
Credit memorandums are usually issued because of a price dispute or a buyer returning goods.
If a buyer has paid the full amount owed, they can either use the credit memo to offset future invoices or demand a cash payment; a buyer who hasn’t paid can only use the credit memo as a partial offset, but they are still required to pay the amount owed after the reduction.
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