FIFO rule to apply the credit memo
The FIFO rule is used to apply a credit memo to invoice items, starting with Invoice Item 3 and then Invoice Item 1, leaving a balance on Invoice Item 1.
The credit memo is applied to the invoice in the following way:
- $40 of the credit memo is applied to the Invoice Item 3. The Invoice Item 3 is fully paid. The amount of $20 is left in the credit memo.
- $20 of the credit memo is applied to the Invoice Item 1. The full amount of the credit memo is then applied. The reminding balance of Invoice Item 1 is $20.
The invoice details after applying the credit memo are as follows.
|
Invoice Item |
Balance |
|---|---|
|
Invoice Item 3 |
0 |
|
Invoice Item 1 |
$20 |
|
Invoice Item 2 |
$80 |
|
Invoice Item 4 |
-$10 |
Suppose you choose to use proration rule to apply the credit memo.
The total unapplied amount of the credit memo is $90 (= $30 + $40 + $20). The amount of credit memo you want to apply to this invoice is $60.
|
Credit Memo Items |
Unapplied Amount |
Amount To Apply |
Proration Rule |
|---|---|---|---|
|
Memo Item 2 |
$30 |
$20 |
$60 * ($30 / $90) |
|
Memo Item 3 |
$40 |
$26.67 |
$60 * ($40 / $90) |
|
Memo Item 1 |
$20 |
$13.33 |
Last item: $60 - ($20 + $26.67) |
|
Memo Item 4 |
- $10 |
0 |
Negative unapplied amount is not included in the proration rule |