Join Bonnie Biafore for an in-depth discussion in this video Applying a credit memo to an invoice, part of QuickBooks: Advanced Bookkeeping Techniques.
- If a customer returns products or gets a credit for another reason, you create a credit memo in QuickBooks, then you can apply that credit to another one of the customer's invoices. To create a credit memo, on the home page, go to the customers panel and look at the bottom right corner. It says refunds and credits. Click that icon, and the create credit memos refunds window opens. Now you might notice that this windows looks a lot like the create invoices window. That's because the credit memo is doing pretty much the opposite of an invoice.
It's going to return money to the customer for things that they've bought. Filling it out is very much like doing an invoice. In the customer job drop down list, choose the customer who's getting the credit, let's say All Kinds of Taste. Now notice that the credit number, it turns out that this is the next number in the invoice numbering sequence. I'm going to leave it that way, but if you want to identify your credit memos, you can do something like type a cr in that box. But I'm just going to go with the invoice numbering sequence.
Fill in the table just like you would an invoice. Let's say there's a tasting party and 10 people didn't show up. In the first item cell, click the down arrow and then choose two trees tasting party. In the quantity cell, type 10. It's a credit memo, so you type a positive number and QuickBooks knows to deduct this from the customer's balance. When I click away from that cell, the program calculates the amount and that's the credit.
If it's a taxable item, QuickBooks will calculate the sales tax that's going to be credited as well. Now you can also fill in the memo cell to explain the reason for the credit. So I'll type in a note that it's a credit for invoice seven, and the final head count was reduced by 10. Then click save and close. Now that you have a credit, the available credit dialogue box opens and it tells you you have three options.
If there's an existing invoice, you can select apply to an invoice and go ahead and apply the credit to that invoice. But if you want to keep the credit around to apply to a future invoice, then keep this retain as an available credit option selected. You'll learn about give a refund in another movie. Click OK. Now the credit is sitting there waiting to be used. Now let's look at applying the credit to an invoice. On the homepage, click create invoices.
We're going to create a new invoice. In the drop down list, choose All Kinds of Taste, that's the customer with the credit. You can fill in the date. You can see the invoice number is the next one in the sequence. The credit memo is nine. This invoice number is 10. Fill in the invoice the way you normally would. If All Kinds of Taste bought a catering dinner for 20, in the first quantity cell type 20. Click the down arrow in the first item code cell and choose catering dinner.
Now let me move the window up a little bit so we can see save and close. I'm going to click save and close. Let's say I forgot about the credit. The program will remind you that there's a credit available, and if you want to apply that credit, click yes. That opens up the apply credits window. I want to move this over because I also want to show you if you remembered that there was a credit for that customer, here's the create invoices window, and the ribbon, and apply credits.
You can apply a credit to an invoice while it's open in the window just by clicking that. That'll bring you to the same window here. In the window, the program automatically turns on the check mark so the credit is applied. You can see that the original amount due is 700, credits used 150, the balance due is $550. The only thing that's left to do is click done. The credit is applied to the invoice. Now on the homepage, I'm going to click create invoices because I want to look at that invoice and just make sure that everything worked the way I wanted it to.
Up at the top left corner, click the previous button. Here's that invoice. You can see the original amount was 700, the credit was applied for 150, and the balance due is 550. That's how you create a credit memo and then apply it to a customer's existing or next invoice.
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- List two documents you can use to record a refund.
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