Which statement about a credit note is correct?

• A. If a customer returns goods they are issued.
• B. A note used to request payment.
• C. A note used to record new credit terms.
• D. A note used to confirm delivery.

Answer: (A)

A credit note is a document that acknowledges a reduction in the amount a customer owes. It is issued when goods are returned or when the seller grants a price adjustment or allowance after the original sale. In bookkeeping terms, it reverses part of the sale, reducing both the revenue recorded and the customer's accounts receivable balance (and, if VAT was charged, adjusts the VAT accordingly). This is why the statement about issuing a credit note when a customer returns goods is correct.

It’s not used to request payment—that role belongs to an invoice or payment demand. It also isn’t used to record new credit terms, which would be handled by a contract or amendment. And it isn’t used to confirm delivery; a delivery note serves that purpose.