A credit invoice or credit memo is a statement detailing a refund or credit to an invoice. For example, you may issue a credit invoice if a customer asks for a refund or if you decide to give a customer a credit for any reason.
In many cases, using credit invoices is more accurate than simply deleting an invoice from your records. In particular, if you use accounting software, there may be blocks in place that prevent you from erasing invoices that have been issued. However, when you issue a credit invoice, the software uses the information from the credit invoice to update your clients’ account, alter your accounts receivables, and adjust your sales tax records accordingly.