The Impact of a Credit

Customer Balance

An OUTSTANDING (i.e. not used) Credit impacts the Customer’s account balance. It means you now owe them money.

Stock Levels

A Credit on its own does not impact stock levels. If you want to bring items back into stock, you need to create a Return separately.

Cost Allocation

Crediting a customer is accounted for as if the income has been lost. Therefore, in the system-generated journal entry created by the created, an entry will be made against the default account that has been set for customer credits. This should be an income account that is netted against top line revenue in income statements.