What transaction is used to decrease the amount a customer owes?

The correct choice is a Credit Memo, as it is specifically designed to decrease the amount a customer owes to a business. When a credit memo is issued, it effectively reduces the customer’s outstanding balance by the amount specified on the memo.

This can happen in various circumstances, such as when there is an overpayment by the customer, when goods are returned, or when a service is not provided as agreed. Essentially, a credit memo acts as a document that confirms the reduction of the debt owed by the customer, thereby helping to maintain accurate financial records and ensuring both the customer and the business have a clear understanding of outstanding balances.

In contrast, other options like Return Authorization relate more to the process of returning items rather than directly impacting overall indebtedness as part of normal transactions. Invoice adjustments may pertain to changing amounts on existing invoices but are not explicitly targeted at decreasing customer debt in a straightforward manner as a credit memo is. Payment processing involves the actual receipt of funds from the customer and does not create a record that decreases the amount owed but rather serves as a payment instruction.