A credit memo is a document that is issued by a seller to a buyer. The purpose of the credit memo is to notify the buyer that they have been credited for an amount of money. This can be due to various reasons, such as, returning merchandise, overpaying on an invoice, or receiving a discount.
The credit memo will contain information such as the date, the name and address of the buyer, the reason for the credit, and the amount of money that has been credited. The seller will then keep this document on file in case there are any questions from the buyer or discrepancies with their account.