Examples of Accounting for Credit Memos with Installments
These examples illustrate the accounting for a partial credit memo against an invoice with installments.
On 1/1/XX invoice 104 is created with these details:
-
Invoice Number = 104
-
Invoice Date = 1/1/XX
-
Invoice Amount = $100
-
Payment Terms = 3 Installments, as illustrated in this table:
Due Date
Amount
2/1/XX
$50
3/1/XX
$25
4/1/XX
$25
This table shows the payment schedules for these installments:
|
Due Date |
Original Amount Due |
Remaining Amount Due |
Total Amount Credited |
|---|---|---|---|
|
2/1/XX |
$50 |
$50 |
$0 |
|
3/1/XX |
$25 |
$25 |
$0 |
|
4/1/XX |
$25 |
$25 |
$0 |
The examples describe three separate scenarios:
-
Scenario 1:
-
A partial credit memo entered against the invoice with the split term method set to Prorate.
-
A partial payment entered against the invoice.
-
Another partial credit memo entered against the invoice.
-
-
Scenario 2:
-
A partial credit memo entered against the invoice with the split term method set to LIFO.
-
A partial payment entered against the invoice.
-
Another partial credit memo entered against the invoice.
-
-
Scenario 3:
-
A partial credit memo entered against the invoice with the split term method set to FIFO.
-
A partial payment entered against the invoice.
-
Another partial credit memo entered against the invoice.
-
Partial Credit Memo with Split Term Method of Prorate
There are three transactions against invoice 104:
-
A partial credit memo for $45 with the split term method set to Prorate.
-
A partial payment of $20.
-
Another partial credit memo for $20.
Transaction 1: On 1/1/XX a credit memo for $45 is entered against invoice 104. The details are:
-
Split term method = Prorate
-
Credit memo date = 1/1/XX
-
Credit memo amount = $45
To calculate the amount credited per payment schedule, Receivables uses the following formula:
Amount Credited = (Credit Memo
Amount/Total Remaining Amount Due) * Amount Due Remaining on this
installment
This table shows the calculations for the amount credited for each installment:
|
Due Date |
Calculation |
Amount Credited |
|---|---|---|
|
2/1/XX |
$45/100 * $50 |
$22.50 |
|
3/1/XX |
$45/100 * $25 |
$11.25 |
|
4/1/XX |
$45/100 * $25 |
$11.25 |
This credit memo affects the payment schedules of invoice 104, as shown in this table:
|
Due Date |
Original Amount Due |
Remaining Amount Due |
Total Amount Credited |
|---|---|---|---|
|
2/1/XX |
$50 |
$27.50 |
$22.50 |
|
3/1/XX |
$25 |
$13.75 |
$11.25 |
|
4/1/XX |
$25 |
$13.75 |
$11.25 |
Transaction 2: On 1/15/XX a payment is received for $20. This payment affects the payment schedules of invoice 104, as shown in this table:
|
Due Date |
Original Amount Due |
Remaining Amount Due |
Total Amount Credited |
Payment Applied |
|---|---|---|---|---|
|
2/1/XX |
$50 |
$7.50 |
$22.50 |
$20 |
|
3/1/XX |
$25 |
$13.75 |
$11.25 |
$0 |
|
4/1/XX |
$25 |
$13.75 |
$11.25 |
$0 |
Transaction 3: On 1/16/XX another credit memo for $20 is entered against invoice 104. The details are:
-
Credit memo date = 1/16/XX
-
Credit memo amount = $20
This credit memo affects the payment schedules of invoice 104, as shown in this table:
|
Due Date |
Original Amount Due |
Remaining Amount Due |
Total Amount Credited |
Payment Applied |
|---|---|---|---|---|
|
2/1/XX |
$50 |
$3.22 |
$26.78 |
$20 |
|
3/1/XX |
$25 |
$5.89 |
$19.11 |
$0 |
|
4/1/XX |
$25 |
$5.89 |
$19.11 |
$0 |
Total Amount Credited per installment
from Transaction 2 + (Credit Memo Amount/Total Remaining Amount Due
from Transaction 2 * Remaining Amount Due per installment from Transaction
2)
The results are rounded to two decimal places.Partial Credit Memo with Split Term Method of LIFO
There are three transactions against invoice 104:
-
A partial credit memo for $45 with the split term method set to LIFO.
-
A partial payment of $20.
-
Another partial credit memo for $20.
Transaction 1: On 1/1/XX a credit memo for $45 is entered against invoice 104. The details are:
-
Split term method = LIFO
-
Credit memo date = 1/1/XX
-
Credit memo amount = $45
This credit memo affects the payment schedules of invoice 104, as shown in this table:
|
Due Date |
Original Amount Due |
Remaining Amount Due |
Total Amount Credited |
|---|---|---|---|
|
2/1/XX |
$50 |
$50 |
$0 |
|
3/1/XX |
$25 |
$5 |
$20 |
|
4/1/XX |
$25 |
$0 |
$25 |
Transaction 2: On 1/15/XX a payment is received for $20. This payment affects the payment schedules of invoice 104, as shown in this table:
|
Due Date |
Original Amount Due |
Remaining Amount Due |
Total Amount Credited |
Payment Applied |
|---|---|---|---|---|
|
2/1/XX |
$50 |
$30 |
$0 |
$20 |
|
3/1/XX |
$25 |
$5 |
$20 |
$0 |
|
4/1/XX |
$25 |
$0 |
$25 |
$0 |
Transaction 3: On 1/16/XX another credit memo for $20 is entered against invoice 104. The details are:
-
Credit memo date = 1/16/XX
-
Credit memo amount = $20
This credit memo affects the payment schedules of invoice 104, as shown in this table:
|
Due Date |
Original Amount Due |
Remaining Amount Due |
Total Amount Credited |
Payment Applied |
|---|---|---|---|---|
|
2/1/XX |
$50 |
$15 |
$15 |
$20 |
|
3/1/XX |
$25 |
$0 |
$25 |
$0 |
|
4/1/XX |
$25 |
$0 |
$25 |
$0 |
Partial Credit Memo with Split Term Method of FIFO
There are three transactions against invoice 104:
-
A partial credit memo for $45 with the split term method set to FIFO.
-
A partial payment of $20.
-
Another partial credit memo for $20.
Transaction 1: On 1/1/XX a credit memo is entered against invoice 104. The details are:
-
Split term method = FIFO
-
Credit memo date = 1/1/XX
-
Credit memo amount = $45
This credit memo affects the payment schedules of invoice 104, as shown in this table:
|
Due Date |
Original Amount Due |
Remaining Amount Due |
Total Amount Credited |
|---|---|---|---|
|
2/1/XX |
$50 |
$5 |
$45 |
|
3/1/XX |
$25 |
$25 |
$0 |
|
4/1/XX |
$25 |
$25 |
$0 |
Transaction 2: On 1/15/XX a payment is received for $20. This payment affects the payment schedules of invoice 104, as shown in this table:
|
Due Date |
Original Amount Due |
Remaining Amount Due |
Total Amount Credited |
Payment Applied |
|---|---|---|---|---|
|
2/1/XX |
$50 |
$0 |
$45 |
$5 |
|
3/1/XX |
$25 |
$10 |
$0 |
$15 |
|
4/1/XX |
$25 |
$25 |
$0 |
$0 |
|
Total |
$100 |
$35 |
$45 |
$20 |
Transaction 3: On 1/16/XX another credit memo for $20 is entered against invoice 104. The details are:
-
Credit memo date = 1/16/XX
-
Credit memo amount = $20
This credit memo affects the payment schedules of invoice 104, as shown in this table:
|
Due Date |
Original Amount Due |
Remaining Amount Due |
Total Amount Credited |
Payment Applied |
|---|---|---|---|---|
|
2/1/XX |
$50 |
$0 |
$45 |
$5 |
|
3/1/XX |
$25 |
$0 |
$10 |
$15 |
|
4/1/XX |
$25 |
$15 |
$10 |
$0 |