What is a correct way to fulfill a recorded customer credit?

• A. Ignore the credit until the customer asks
• B. Convert it to a vendor credit
• C. Issue a refund by check or apply the credit to an invoice.
• D. Delete the credit memo

Answer: (C)

A customer credit represents a credit memo that creates a small liability to the customer. The proper way to fulfill it is to settle that credit by either issuing a refund or applying it to an invoice. If you issue a refund by check, you’re returning cash and clearing the credit liability. If you apply the credit to an invoice, you’re reducing the amount the customer owes without moving cash, which clears part or all of the invoice balance. Both methods correctly close out the recorded credit and keep the financial records accurate.

Ignoring the credit leaves a liability lingering and the customer’s balance unresolved. Converting a customer credit to a vendor credit misapplies the transaction to a different party. Deleting the credit memo removes documentation and can distort your records.