What is a cash memo?
A cash memo is a document that is used whenever a transaction occurs between two parties. The transaction must occur in cash so that the memo can be used. In the case of the seller and buyer, the seller creates the memo and then gives it to the buyer at the time of purchase. In a business scenario, this memo is used as evidence that the purchase has taken place. The seller always makes two copies of this document. He keeps the original cash memo with him and sends a copy to the customer.
How does a cash memo work?
A cash memo works a little differently from an invoice. A cash memo is prepared and delivered by the seller when a customer makes payment for the goods he has purchased. On the other hand, an invoice is a document that is handed over to the customer and describes the details of the product(s) he has purchased. An invoice is not proof that the payment has been made by the customer.
When a cash memo is used, a business keeps a record of its sales easily and conveniently.
A lot of other information is also collected when the cash memo is used. For instance, when the amount of tax paid by the business is required to be known, a business pays attention to the cash memo. A business also conducts the planning of inventory with the use of a memo of cash.
Importance of using the cash memo
Sellers are usually recommended to use the cash memo because it helps them keep proof that the payment has been made by the buyer. The cost of each transaction is mentioned in the memo for collecting the details about the cash balance.
It should be kept in mind that sales that are conducted on credit cannot be documented with the use of a cash memo. Since this memo is only practicable for cash a business receives from its clients and customers,
What is the format of the cash memo?
If you are going to use the memo whenever you receive payment from your customers, you will be required to create it for your business. To create this memo, you should be aware of the format. Here is a detailed description of the format:
- You can use any software to draft the memo. However, MS Excel and MS Word are the most appropriate software that can be used for this purpose.
- Mention the name of your company at the top of the memo. You can also print the name and logo on the letterhead of your company. Don’t forget to mention the ‘’cash memo’’ on the top.
- Give details of the buyer who is going to get this memo of cash. This will confirm to the buyer that this memo was specifically written for him.
- Describe the items the buyer has purchased. If the buyer has bought more than one item, then mention all the items with a serial number.
- Also, mention the quantity of the items in another column. The cost of each item should be specified in the next column.
- In the last column, mention the total amount that the buyer has paid to the seller.
Memo File: 89 KB
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