Final answer:
The source document for the return and adjustment to customer credit status is the Credit memorandum. It is a formal record used to reflect the returned items and adjust the customer's outstanding balance. So the correct answer is Option C
Step-by-step explanation:
The source document that initiates the recording of the return and the adjustment to the customer's credit status is the C. Credit memorandum. A credit memorandum, also known as a credit memo, is a formal document issued by a seller to a buyer. It acknowledges the return of goods previously sold and indicates the amount that will be credited to the buyer's account. This document is used by the accounting department to adjust the sales ledger and customer's account to reflect the returned items and the resulting decrease in the amount the customer owes. It differs from the sales invoice, which is used to request payment from a customer for goods or services delivered.
The correct answer is Option C