Credit Memo 
Definition
The term credit memo always refers to a credit memo from the vendor. Therefore, posting a credit memo always leads to a debit posting on the vendor account.
Use
As in the case of invoices, credit memos reference purchase orders or goods receipts. They are used to correct the purchase order history if the quantity invoiced was too high. This might occur, for example, if an invoice was too high or if part of the quantity covered by the invoice was returned.
When you post a credit memo, the total quantity in the purchase order history is reduced by the credit memo quantity.
Principle of Prudence
The principle of prudence can be applied to credit memos. By this principle, credit is not taken until thememo or the cash is actually received from the vendor.
Some configuration work is required before the principle can be applied. To do this, go to the Public Sector Management section of the Implementation Guide (IMG) and choose
General Settings for Public Sector Management 
Integration Principle of Prudence Define Derivation Strategy for Principle of Prudence 
.
The documentation for the IMG step provides detailed instructions on what you must do then.
See also: