Credit notes, also known as credit memos, are typically issued by vendors to their customers in order to rectify or address issues such as overstated invoice amounts, erroneous discount rates, and product returns and allowances. As a commercial document, a credit memo obligates the seller either to give back the money paid by the buyer or to deduct the amount from the buyer’s balances. It can also be exchanged for other products or goods with equal or lower value as stated on the instrument.

Apart from merchandising establishments, banks are also known to issue credit notes to their depositors. When issued by a bank, a credit memo indicates that the depositor’s account has been credited or increased with an amount not brought about by a deposit from the client but by other factors, such as the clearing of the depositor’s check receivables and the receipt of interest income due on the bank account.

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