Some terms of Accounting

A Credit Memo (short for "credit memorandum") is a commercial document issued by a seller to a buyer, listing the products, quantities and agreed prices for products or services the seller provided the buyer, but the buyer did not receive or returned. It may be issued in the case of damaged goods, errors or allowances. In respect of the previously issued invoice, a Credit Memo will reduce or eliminate the amount the buyer has to pay.

The Credit Memo usually contains: PO #, Date, Billing Address, Shipping Address, Terms of Payment, List of products with quantities and prices. Usually it references the original Invoice and sometimes states the reason for issue.

Credit Memos are often called Credit Notes or just Credits.

The seller usually issues a Credit Memo for the same or lower amount than the invoice, and then repays the money to the buyer or sets it off against a balance due from other transactions.

The term may also refer to the document provided by a bank to a depositor to indicate the depositor's balance is being increased because of an event other than a deposit, such as the collection by the bank of the depositor's note receivable.

 

 

Bill of exchange

A bill of exchange or "draft" is a written order by the drawer to the drawee to pay money to the payee. A common type of bill of exchange is the cheque (check in American English), defined as a bill of exchange drawn on a banker and payable on demand. Bills of exchange are used primarily in international trade, and are written orders by one person to his bank to pay the bearer a specific sum on a specific date. Prior to the advent of paper currency, bills of exchange were a common means of exchange. They are not used as often today.

A bill of exchange is an unconditional order in writing addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at fixed or determinable future time a sum certain in money to order or to bearer. (Sec.126)

It is essentially an order made by one person to another to pay money to a third person.

original parties to a bill of exchange.

A bill of exchange requires in its inception three parties--the drawer, the drawee, and the payee.

The person who draws the bill is called the drawer. He gives the order to pay money to third party. The party upon whom the bill is drawn id called the drawee. He is the person to whom the bill is addressed and who is ordered to pay. he becomes an acceptor when he indicates his willingness to pay the bill. (Sec.62) The party in whose favor the bill is drawn or is payable is called the payee.

The parties need not all be distinct persons. Thus, the drawer may draw on himself payable to his own order. (see Sec. 8)

 

 

Down payment (or downpayment) is a term used in the context of the purchase of expensive items such as a car and a house, whereby the payment is the initial upfront portion of the total amount due and it is usually given in cash at the time of finalizing the transaction.^[1] A loan is then required to make the full payment.

The main purpose of a down payment is to ensure that the lending institution can recover the balance due on the loan in the event that the borrower defaults. In real estate, the asset is used as collateral in order to secure the loan against default. If the borrower fails to repay the loan, the lender is legally entitled to sell the asset and retain a portion of the proceeds sufficient to cover the original amount of the loan.

By requiring a down payment in advance, the lender greatly increases the chance that any such future sale would be able to cover the full amount of the loan, because such a sale only requires the lender to recover the difference between the original selling price and the amount of the down payment, as opposed to the entirety of the original selling price.

If the borrower is unable to pay off the loan in its entirety, he/she forfeits the down payment amount.