A credit memorandum is used as documentation for a journal entry that requires a debit to
A) Sales and a credit to Cash.
B) Sales Returns and Allowances and a credit to Accounts Receivable.
C) Accounts Receivable and a credit to a contra-revenue account.
D) Cash and a credit to Sales Returns and Allowances.

Question

Quizplus · Accepted Answer

A credit memorandum is used to document a transaction where the customer is returning goods or receiving an allowance for faulty or defective goods. These returns and allowances are recorded as debits to Sales Returns and Allowances and credits to Accounts Receivable. Therefore, choice B is the correct answer.

A Credit Memorandum Is Used as Documentation for a Journal