Oracle Financials - Debit Memo and Credit Memo

Many Peoples in Oracle Financials ERP often confuse between the two:

Debit Nore or Debit Memo

Credit Note or Credit Memo

If your question is "Is there any difference in steps for creating Debit Memos and Credit memos in Oracle
Apps?", the answer is "NO". Both Debit memo and credit Memos are created in Oracle Applications using
the same forms and the same process (well almost)

However there is a fundamental difference between the two entities. Allow me to list some of
the basic differences below.
 
Debit Memo Vs Credit Memo in Oracle Applications
1. How and When:
When a particular organization chooses to return any item (could be a store item or even a Service Item)
back to the supplier, it generates a Debit Memo for the supplier and attaches it along with the item
returned. Items could be returned by any organization based on the variety of factors like defective parts,
inefficient quality, wrong parts, delayed delivery, etc, etc)

Credit Memo or Credit note on the other hand is created by the Supplier. The Supplier creates such credit
memos in order to abject the sales invoice that has been sent to the customer. Such adjustments could
be needed for multiple reasons like wrong invoicing, returned items, allowing additional discounts, etc

2. Who Gets Affected

In both cases, it is always the supplier whose balance ends up reducing. In case od debit memo, the
customer asks for the reduction while in case of credit memo, the supplier reduces himself. On a lighter
note, if you are a supplier, its like someone asking you for many Vs you giving the money yourself. Either
way its you who gets poorer.

In Oracle Payables, both Debit memos and credit memos accept negative amounts only. The
basic differance is where it originates, weather at the customers end or at the vendors end.

3. Accounting Entries

In both cases the accounting entry is the same. It’s the Expense Account Cr to Supplier/Customer
(depending on which party you are dealing with)

4. Real Example
Let us consider an example. Let the invoice amount be 2000. Now if supplier initiates 200 credit memo,
then it is expected that due to some irregularities in invoicing, he is sending a credit memo, and therefore
actual invoice amount is 1800.So the supplier total balances will come down from 2000 to 1800.

Now, let us consider the case of debit memo. If there are any defect with supplied items, and the defect
is worth 500,then customer forward a debit memo of 500 to the supplier. In this case as well, the
supplier balances will come down from 2000 to 1500.