How to create and apply credit memos to invoices or bills?

Credit memos help keep the balances of the Accounts Receivable (AR) and Accounts Payable (AP) accurate by allowing users to reduce the amount of the original invoice or bill when an adjustment is needed. In this article, we cover the necessary steps to:
1. Create and keep records of your customers and vendors' credit memos.
2. Apply credit memos to invoices or bills.
3. Additional information when the credit memo is due to an RMA.

1. Creating a credit memo.
To keep track of credit memos issued to your customers or credits received from your vendors, navigate to the Accounting module → Credit Memo sub-module. Click the green “New Credit Memo” button, and then select the appropriate option: “For Customer” or “For Vendor.”

A new window will pop up where you will find several fields to complete. 

Notice that a new record will be added with the "Unapplied" status.

2. How do you apply a credit memo to an invoice/Accounts Receivable or a bill/Accounts Payable?
We need to navigate through the Accounting module -> sub-module Accounts Payable / Receivable. Once there, we need to filter by the customer's or vendor's name, depending on the specific case. Then, using the three dots at the right, we select the option of Manage Payments.

This will open a new window where you should select the credit memo you wish to apply.

Once this is done, the status of the credit memo will change to "Applied". You can verify this by searching on the credit memo sub-module and checking the status.

Additionally, after completing the steps above, you can check the invoice itself to confirm that the credit memo has been applied.

3. Credit memo associated with an RMA.
If a credit memo is required because of an RMA, follow the same steps explained in this article, with the only difference being that you need to select the related RMA when creating it.