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Difference between Credit Memos

  • 2 February 2022
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This seems like a simple enough question but I can’t seem to find a clear answer on it so I decided to take to the experts here!  In laman’s terms, what’s the difference between the following as it affects inventory and accounting?  It seems to me they have the same functionality, but there has to be a difference between each one, no?

  • Credit Memo
  • Return for Credit
  • RMA Order
  • Return with Replacement
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Best answer by Kandy Beatty 2 February 2022, 15:44

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Hi @TracyVogt 

They all have the same flow almost. It depends on how the company processes returns. Some create an inventory receipt whether you receive a product back or not. They all will give the customer a credit except the RMA, it is used for warranty work mostly. 

Credit Memo is used for adjustments to already complete Sales Orders. This strictly gives the customer a credit on their balance which can be applied to a future order.

The below all create a Credit Memo Invoice and depending on if you receive product back, it can go into inventory if it is usable or not. 

Return for Credit is used for credit without replacements. It functions the same as a Credit Memo. 

RMA is used when an authorized return for a replacement or such as a warranty item. Usually, you receive a product to do work on with no charge to the customer. 

Return with Replacement is used for returns authorized returns for replacement. This would be receiving an item in and shipping one back out. 

As far as accounting, it reverses what was done on an original order. 

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