Final answer:
A credit note is issued when a customer returns faulty inventory.
Step-by-step explanation:
The correct answer is:
A. Credit note
When a customer returns faulty inventory, a credit note is typically issued as a form of reimbursement. A credit note is a document issued by a seller to the buyer, indicating the amount that the buyer is allowed to deduct from the amount owed for the returned goods. It serves as a record of the transaction and can be used as evidence for future reference.
For example, if a customer purchases a defective product and returns it to the seller, a credit note may be generated to refund the customer's payment or provide store credit.