Which type of transaction affects a customer balance immediately?

• A. Credit Memo
• B. Invoice
• C. Refund
• D. Payment

Answer: (A)

A credit memo directly lowers what a customer owes. It’s a seller-issued credit that creates a negative line on the customer’s accounts receivable, so as soon as you record it, the customer balance is reduced. This happens whether or not there’s an existing invoice to offset, because the credit memo represents an actual reduction in the amount the customer owes and can be applied to future charges.

An invoice, on the other hand, increases the balance by adding amount owed. A payment reduces the balance by bringing in cash from the customer, usually applied to an invoice. A refund returns money to the customer and will reduce the balance only as the refund is processed against the customer’s open charges, but the immediate, built-in reduction created by issuing a credit memo is what makes it the correct choice here.