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Key takeaways
- A credit memo reduces the amount a buyer owes to a seller. A debit memo increases it.
- The same document can be issued by the seller or requested by the buyer, with a different name depending on who raises it.
- Both refer to the original invoice and state the reason.
- The tax treatment follows the original invoice.
Free PDF and Excel: Memo posting guide with worked entries. Get it below
At a glance
| Feature | Credit memo | Debit memo |
|---|---|---|
| Effect on buyer's balance | Lowers it | Raises it |
| Typical reasons | Returns, price cut, billing error, rebate | Undercharge, extra charge, freight added |
| Seller books | Reduces receivable and sales | Increases receivable and sales |
| Buyer books | Reduces payable | Increases payable |
| Who raises it | Normally the seller | The seller, or a buyer asking for a credit using a debit memo |
| Detail pages | Credit memo | Debit memo |
In bank language a debit reduces your account and a credit raises it. In supplier language a credit memo reduces what you owe. The difference is whose perspective the word is used from. Always read which ledger you are posting to.
A supplier invoices 1,000 units but 40 arrive damaged. It issues a credit memo for 40 units. The buyer's payable falls by their value.
Later the supplier realises freight of 300 was left off. It issues a debit memo for 300. The buyer's payable rises by that amount.
Net effect: the original invoice, minus the credit, plus the debit.
The version for India is covered on credit note under GST and debit note under GST. The general concept is on credit note and debit note.
- It cites the original invoice.
- The reason is stated.
- The amount and tax are right.
- It is posted to the correct ledger.
- The other side has acknowledged it.
Last checked: 19 October 2026. General accounting practice.
Free PDF and Excel
Memo posting guide with worked entries
A guide to posting credit and debit memos on both sides, with worked entries you can copy.
- Effect table
- Worked entries
- Posting check list
- Excel memo log
Frequently asked questions
What is the difference between a credit memo and a debit memo?
A credit memo reduces the amount owed. A debit memo increases it.
Who issues a credit memo?
Usually the seller, to correct or reduce an invoice.
Does a debit memo mean the buyer owes more?
Yes, if issued by the seller. A buyer may also issue a debit memo to ask for a credit.
Do memos affect tax?
Yes. Tax on the original invoice is adjusted in the same proportion.
Can I just cancel the invoice instead?
In some cases yes. Otherwise, a memo keeps a clean audit trail.