A more thorough explanation:

A credit memorandum is a document that a seller sends to a buyer to confirm that the seller has reduced the buyer's account due to an error, return, or allowance.

For example, if a buyer returns a defective product to the seller, the seller will issue a credit memorandum to the buyer to confirm that the buyer's account has been credited for the amount of the returned product. Another example is if the seller accidentally overcharged the buyer, the seller will issue a credit memorandum to the buyer to confirm that the buyer's account has been credited for the overcharged amount.

The credit memorandum serves as proof of the transaction and helps to ensure that the buyer's account is accurate. It is an important document for both the seller and the buyer to keep for their records.