Purchase Return Order vs. Credit Memo

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Posted on by JE-20081519-0

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Hi:

We conducted a three-way Purchase Order matching. Afterward, we successfully posted a Purchase Credit Memo.

We conducted another three-way Purchase Order matching. Afterward, we successfully posted a Purchase Return Order.

Even though both documents serve two separate purposes, processing and posting the Purchase Credit Memo and the Purchase Return Order conducted the same objective.

Both updated Inventory and A/P the same way, so for what reason in such an environment would there be for using one document versus the other?

Thanks!

John

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Dynamics 365 Business Central

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Holly Huffman 6,538 Super User 2025 Season 2 on at

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Good morning, afternoon, or evening depending on your location!

While both Purchase Return Orders and Purchase Credit Memos can achieve similar outcomes in terms of updating Inventory and Accounts Payable (A/P), they serve distinct purposes and are used in different scenarios:

Purchase Credit Memo:

Typically used for financial adjustments or corrections.

Ideal for situations where you need to reverse charges or request a refund from the vendor without physically returning items.

Often created directly from the posted purchase invoice for ease of use.

Purchase Return Order:

Designed for physical returns of items to the vendor.

Provides more control over the return process, including warehouse handling and shipping documentation.

Automatically generates a Purchase Credit Memo upon posting, ensuring financial adjustments are also recorded.

In environments where both documents achieve the same objective, the choice often depends on whether the return involves physical goods or is purely a financial transaction. If you’re returning items, the Purchase Return Order is more appropriate as it includes logistics-related details. For financial corrections, the Purchase Credit Memo is simpler and faster to use.

Hope this is helpful :)

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Ramesh Kumar 7,529 Super User 2025 Season 2 on at

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Hi John,

I’ve asked myself this question many times too. The simple answer comes down to separation of duties and clear logic. You use a Purchase Return Order when physically returning goods — typically handled by the warehouse team. On the other hand, a Purchase Credit Memo is used by the finance team to handle the financial side of the return.

Thanks, Ramesh

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YUN ZHU 95,729 Super User 2025 Season 2 on at

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This is the same as the relationship between Sales Order -> Sales Invoice.
Why do we need Sales Order when we have Sales Invoice?

Simply put, when we need to post inventory and amount separately, we need Sales Order.

Hope this helps as well.

Thanks.

ZHU

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Jainam M. Kothari 15,639 Super User 2025 Season 2 on at

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Hello,

Purchase Return Order is same as Purchase Order, when you need to return the Goods then it will be used and

Purchase Credit Memo is same as Purchase Invoice, it will give the financial impact.

Kindly consider the same.

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Khushbu Rajvi. 20,601 Super User 2025 Season 2 on at

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The separation of duties is key. A Purchase Return Order ensures that the warehouse team handles the physical return of goods, updating the inventory, and making sure everything is tracked properly in the system. The Purchase Credit Memo, on the other hand, is more about adjusting the financial records and is typically managed by the finance team to reflect changes in what’s owed to the vendor, without involving the physical movement of goods

https://www.youtube.com/watch?v=TtsUf6qdA7Q

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RockwithNav 8,637 Super User 2025 Season 2 on at

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Guess each and every NAV/BC resource would have ended to this question :)

Shortest answer to understand this is the same example which still people explain - Exact Relation between Purchase Order and Purchase Invoice, Sales Order and Sales Invoice, Purchase Credit memo and Purchase Return Order, Sales Credit Memo and Sales Return Order.

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