Page 191 - Accounting Information Systems

162 PART II Transaction Cycles and Business Processes

FI GU RE
4-8 CREDIT MEMO

Credit Memo

Monterey Peninsula Co-Op Customer
527 River Road Invoice #
Chicago, IL 60612
(312) 555-0407

Received from Reason for Return
Address
City
State Zip

Product Description Quantity Unit Total
Number Returned Price

Total
Approved By:
Credit

PREPARE RETURN SLIP. When items are returned, the receiving department employee counts,
inspects, and prepares a return slip describing the items. The goods, along with a copy of the return slip,
go to the warehouse to be restocked. The employee then sends the second copy of the return slip to the
sales function to prepare a credit memo.

PREPARE CREDIT MEMO. Upon receipt of the return slip, the sales employee prepares a credit
memo. This document is the authorization for the customer to receive credit for the merchandise returned.
Note that the credit memo illustrated in Figure 4-8 is similar in appearance to a sales order. Some systems
may actually use a copy of the sales order marked credit memo.
In cases in which specific authorization is required (that is, the amount of the return or circumstances
surrounding the return exceed the sales employee’s general authority to approve), the credit memo goes to
the credit manager for approval. However, if the clerk has sufficient general authority to approve the return,
the credit memo is sent directly to the billing function, where the customer sales transaction is reversed.

APPROVE CREDIT MEMO. The credit manager evaluates the circumstances of the return and makes
a judgment to grant (or disapprove) credit. The manager then returns the approved credit memo to the
sales department.