If merchandise sold on account is returned to the seller, the seller acknowledges the return by issuing a

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A credit memo is used to acknowledge a return of merchandise sold on account. It reduces the amount of the customer's accounts payable balance. A sales invoice would be used to bill the customer for a sale, a purchase invoice is used by a buyer to document a purchase, and a debit memo is used to notify a customer of an increase in their accounts payable balance.

If Merchandise Sold on Account Is Returned to the Seller