Using Credit Memo or Cancellation to refund a customer

An A/R Credit Memo reverses the journal entry created by the A/R invoice. (Either part of it, or all of the journal entry)

When you create this A/R Credit Memo, referencing an A/R Invoice, the system will correct the values and quantities in the AR Invoice.
*The system adds the inventory back into stock for the credited items
*The system credits the customers account in the General Ledger for the amount refunded. (It also corrects revenue)

If the credit memo is an item-type credit memo, with rows for inventory items, the journal entry will also increase the stock amount in inventory, and decrease cost account.

If the A/R Invoice has been paid, it closes that document. You have to open it again before returning it. (Right click and change the Doc status to open). Refresh the document and then the option in the bottom right to Copy To Credit Memo will be available.

*If you don't want to have the Credit Memo affect your inventory, you have two choices:
1. Put a check in "Without Qyt posting" on the item row.
2. Use a Service-type credit memo.
The item-type Credit Memo can be copied from the A/R Invoice. The Service type cannot.
Service type should be used when you don't want to reference the invoice as a base doc.

If a customer wants to return an item that doesn't refer to a specific invoice, you can post this quantity directly to the warehouse without referencing a document. (Without Reference)
If the Credit Memo is for inventory items, then the stock and stock values increase as a result.

*Without Qty posting
This will only affect the customers account balance and revenue. It will not do any goods movement. It also doesn't touch stock postings or cost postings.

Cancelling instead of using Credit Memo:

Right click and choose Cancel

You can only use if all the items were not sent out for delivery and still remain in the warehouse. This can also be used when the customer wants to be invoiced AFTER all items are received.

Cancelling
1. Creates a new cancellation document with reversal postings, including quantities, and status is set to Closed--Cancellation
2. The original A/R Invoice posting remains and the status is set to cancelled.
**Cancelling a document is easiest as it reversed all accounting, fiscal, financial, and inventory transactions in one step. Base documents such as delivery, are re-opened after cancellation and can be used as a base doc again
3. Reporting is available for cancelled documents, since the original posting remains in the system along with the cancellation

If the money has been transferred, you cannot use a Credit Memo. You will have to issue a refund on the invoice another way. (See screenshot)