Sometimes it is necessary to provide credit to customers as a gesture of accommodation, for instance:
There are many unexpected situations in which sellers may adjust accounts of their customers, giving credit against the balance due.
Trade with customers isn’t a mechanical exercise, it is a relationship in which many unexpected things happen, for instance:
The issuing of a Credit Memo will allow the company to reduce the customer’s outstanding obligation to it by crediting accounts receivable as shown below:
Non-conforming Product Expense $X.XXX,XX
Trade Receivables $X.XXX,XX
- to record price accommodation for noted defects in product shipped.
Crediting accounts receivable by using a credit memo requires a clear understanding on how to create a [GL item](/G/L_Item) as well as the way they are used in [Sales Financial Invoices](/Sales_Invoice#Lines).
It is highly recommended to understand how [Sales Document types](/Document_Type) are configured in Openbravo and how [Credit Sales Invoices](/Sales_Invoice#Header) can be created as well.
In Openbravo, the company in this example will have to issue a credit memo by using a specific accounting item or GL Item.
The company in this example will issue a [Credit Memo](/Sales_Invoice#Header) that does not involve the return of goods.
Credit memo is considered a financial invoice in Openbravo terminology, which distinguishes it from invoices that relate to products and services.
To process a financial invoice for the credit memo, a [G/L Item](/G/L_Item) must be created first, a G/L Item called Product Defects by example, mapping the G/L Item to an expense account of the same name. In practice you may use any G/L item related to any expense account to record the debit transaction that will be posted.
The above window shows the G/L item created to process the credit memo. Note that when you create a G/L item for the credit memo, you need to select the Enable in Financial Invoices checkbox and the G/L item needs to be assigned to an expense account named in both GL Item Debit Acct and GL Item Credit Acct fields, both fields can be found in the [Accounting](/ManualDoc/T800034) tab of the G/L Item window.
In order to credit the customer account, an A/R Credit Memo is raised:
Below shows the posting created for the Credit Memo:
This completes the creation and processing of the credit memo. As a result: