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Say one of your vendors sends you the wrong products or the right ones arrive but they are damaged. You call your vendor who issues you a credit. You have to record that credit in QuickBooks. Once you do, you can then apply that credit to a bill from that vendor to reduce what you have to pay. Recording a credit is almost identical to entering a bill. In fact, you use the Enter Bills window to do it. On the homepage click Enter Bills. QuickBooks automatically selects the Bill option, which sets up the window to enter a bill.
Because you want to record a credit select the Credit option instead. The window heading changes to Credit and the Amount label changes to Credit Amount. In the Vendor dropdown list choose the vendor who issued you the credit. Choose the date that the vendor issued the credit in the Date box. If you want to record the vendor's ID for the credit, type it in the Ref Number box, then in the Credit Amount box, type the amount of the credit. Similar to when you enter a bill you fill in lines on the Expenses tab or the Items tab to identify what you're getting credit for.
In this case, choose the Office Supplies account on the Expenses tab. Even though you're getting a credit, which means you owe less money, you still fill in the amount of the credit with a positive number. QuickBooks takes care of tracking whether to add or subtract numbers. Fill in the Memo cell with info about the credit. If the expense was billable to a customer, you can choose the customer or job in the Customer:Job cell to remove the amount from what the customer owes.
When you're done, click Save and Close to close the dialog box. When you have credits available, they reduce the balance you owe in your accounts payable account. The vendor credit waits until you go to pay a bill from that vendor. To see the credit, open the Chart Of Accounts window and double-click Accounts Payable to open the register. You can see the credit to coffee service here. When you go to pay bills, QuickBooks shows the bills waiting to be paid, but there's no sign of the vendor credit just yet.
If you turn on the check box for a bill from the vendor who issued a credit, like Coffee Service shown here, QuickBooks shows the available credit in the Discount and Credit information section. QuickBooks automatically fills in the Amount To Pay cells with the full bill amount and the credits used is still zero. So, to apply the available credit to the bill, click Set Credits. In the Discount and Credit dialog box, the Credits tab opens and QuickBooks automatically selects the available credit.
The Credits Used value shows how much credit you applied and the Amount To Pay shows how much of the bill you still owe. You can edit the amount of the credit if you want to, but if it's set up the way you want, click Done to apply the credit to the bill. Back in the Pay Bills window, the Credits Used cell for the bill shows how much credit you applied and the Amount To Pay cell shows the remaining balance on the bill.
As you do for regular bills, choose the Payment Date, the Payment Method and the Payment Account before you click Pay Selected Bills. As you learned in the video Paying Bills, you can assign check numbers or tell QuickBooks to do that for you. Then when you're done, click Done to finish paying your bills. If you tend to forget about things like credits and discounts, you can tell QuickBooks to apply them to bills automatically. To do this on the Edit menu, choose Preferences, click Bills and then click Company Preferences.
Turn on the Automatically use discounts and credits check box. For discounts choose the account you want to use to track discounts from vendors, such as Vendor Discounts. Click OK to save your preferences. With this preference set, when you pay a bill for a vendor who has issued a credit or offers an early payment discount you qualify for, QuickBooks automatically applies the credit and discounts to the bill. If you don't want to use them you can click Set Credit or Set Discount to change the amount of credit or discount applied.
You can keep credits around for as long as you want, but it's a good idea to use them sooner than later, before the purchasing power of your money goes down or the vendor goes out of business.
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