A debit memo
A) Reduces the amount of accounts payable due to a vendor.
B) Reduces accounts payable when payment is made.
C) Is used by vendors to record cash payments received.
D) Authorizes a debit to purchases when goods are received.

Question

Quizplus · Accepted Answer

A debit memo is a document used by the purchaser to inform the vendor that a debit is being made to their accounts payable balance. This can be due to various reasons, such as returned merchandise or a pricing discrepancy. It reduces the amount of accounts payable due to the vendor, hence option A is correct. Option B is incorrect as it is referring to a payment, whereas a debit memo is a record of a decrease in owed amount. Option C is incorrect because the vendors receive payments and would issue a credit memo to record those payments. Option D is incorrect because a debit memo is not used to authorize a debit to purchases, but it is recorded after the goods are received and a debit has occurred.

A Debit Memo