when the merchandise is sold on credit and the seller notifies the buyer of a price...

when the merchandise is sold on credit and the seller notifies the buyer of a price reduction, does the seller send a credit memo or a debit memo?

Expert Solution

When the merchandise is sold on credit and the seller notifies the buyer of a price reduction, seller send a credit memo and not a debit memo. A credit memo is issued by seller in order to reduce the amount of sale. This credit memo will reduce the amount of net sale and amount of the account receivable. The price reduction is demanded by buyer to seller if the buyer found some defective units.The journal entry due to credit note is that sales returns and allowances is debited and account receivable will be credited. So when the merchandise is sold on credit and the seller notifies the buyer of a price reduction,the the seller sends a credit memo.

ekkarill92 answered 2 years ago

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