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| Re: Debit Memo and Credit Memo in AP and AR modules ? [message #189170 is a reply to message #189160] |
Wed, 23 August 2006 08:39   |
David.K.Dickson
Messages: 413
Registered: October 2005
Location: Surrey, England
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Senior Member |
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| srkiran23 wrote on Wed, 23 August 2006 14:01 |
Would you please explain what is Debit Memo and Credit Memo in AP and AR modules ?
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A Credit Memo is always issued by the organisation that sent the original Invoice. So if we send a Customer an Invoice for 100 items, but only 98 arrived in good condition and 2 were damaged, we would send the Customer a Credit Memo for the 2 damaged items. If we received an Invoice from a Supplier for 50 items, but found that 5 were damaged, we would ask the Supplier for a Credit Memo for the 5 damaged items.
A Debit Memo is always issued by us. If we send an Invoice to a Customer but we made a mistake on the price or quantity and undercharged them, we would raise a Debit Memo for the difference (if we overcharged them, we would issue a Credit Memo). If we received an Invoice from a Supplier where we were overcharged for some reason, but we were not sure if we would get a Credit Memo from them, but we wanted to pay the bulk of the Invoice, we would raise a Debit Memo for the difference; it forms part of the audit trail and explains why we did not pay the exact amount of the Invoice.
 HTH
David.
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| Re: Debit Memo and Credit Memo in AP and AR modules ? [message #189374 is a reply to message #189242] |
Thu, 24 August 2006 05:51 |
David.K.Dickson
Messages: 413
Registered: October 2005
Location: Surrey, England
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Senior Member |
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Srkiran,
Read my reply again:-
A Debit Memo is always issued by us.
Let's try an example. In Payables, a Supplier sends us an Invoice, say for 50 items at £2 each making the invoice amount £100 (and we will ignore tax, to keep it simple). When the goods arrived, the box was damaged and when we opened the box we found that 5 of the items were not usable. We telephone the supplier to explain, asking them to issue a Credit Memo for (5x£2) £10. However, we know from past experience that the Credit Memo may take a long time to arrive, if it ever arrives at all.
We want to pay for the 45 good units. So we raise a Debit Memo for £10 and match it to the £100 Invoice leaving a balance of £90. We approve and pay the Invoice and the Debit Memo. The Remittance Advice will show both, explaining why we have not paid the full Invoice amount.
If the Supplier subsequently sends us a Credit Memo, we don't enter it on the system but we might update the Debit Memo with the Supplier's Credit Memo number.
I once did some unit testing of a customisation for matching Credit Memos to Debit Memos, but that was a long time ago.
HTH
David.
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