Question

Credit Memos reduce (credit) Accounts Receivable and reduce (debit) income accounts and in some cases, Sales Tax Payable.

a-true
b-false

Answer 1

Credit Memos reduce (credit) Accounts Receivable and reduce (debit) income accounts and in some cases, Sales Tax Payable.

Step-by-step explanation:

The statement 'Credit Memos reduce (credit) Accounts Receivable and reduce (debit) income accounts and in some cases, Sales Tax Payable' is true.

When a credit memo is issued, it decreases the amount owed by the customer, therefore reducing Accounts Receivable. It also reduces income accounts because the revenue associated with the sale is reversed. In some cases, a credit memo can also reduce the Sales Tax Payable if the tax was previously collected and now needs to be refunded.