Credit/Debit Memos
Overview
The Credit/Debit Memos function is used in the event if a vendor gets paid in error, or gets
overpaid. Credit Memos are transaction type number 2 in invoice data entry, and Debit Memos
are transaction type 3. This tech note will demonstrate how to apply two types of refunds to an
invoice.
I. Vendor sends a refund Check
The original transaction in Accounts Payable would show as follows:
Debit Credit
Invoice entered Expense A/P
Payment A/P Cash
In this case, a Credit memo needs to be created against the same invoice number to show that the
vendor owes money on this invoice. The Credit memo needs to be associated with the original
invoice through the APPLY TO field.
The Apply To field is very important to the Credit/Debit Memo process. Without it, the system
will not know what invoice is affected by the memo.
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The accounting entry for the Credit memo would be as follows:
Debit Credit
Credit memo A/P Expense
When the check comes in, enter a Debit memo applied to the original invoice number. This will
clear A/P.
Debit Credit
Debit memo Cash A/P
In summary, an example of the above scenario would look like this:
A/P Expense Cash
Invoice (100.00) 100.00
Payment 100.00 (100.00)
Credit memo 100.00 (100.00)
Debit memo (100.00) 100.00
The net effect is zero for the vendor that was overpaid (paid in error). This creates a valid audit
trail.
II. Vendor does not send a refund Check
In the event that the vendor does not send a refund check, the Credit Memo will still be created
and posted to the vendor’s account. This will remain on the vendor’s account and be deducted
from the next check generated to pay any future invoices.
If there are any further inquiries, please refer to our online Support Forums or contact the Data
Plus Support department.
Support Forum www.dphs.com/forums/
Data Plus Support 978-888-6300 Ext 3
support@dphs.com
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