How to Apply Credit Memo in QuickBooks?

In this article, you will be given a detailed step-by-step guide on how to apply credit Memos in QuickBooks, what is the difference between credit memos and refunds, and more essential details.

QuickBooks has helped millions of users across the globe by providing its cloud-based accounting software. QuickBooks enables small business owners to make their accounting journey easy and manageable.

In QuickBooks, if you do not wish to apply the credit memo manually, you can use the feature of ‘credit memo auto-apply’ on your desired transitions.

How to Apply Credit Memo in QuickBooks? | Easy Steps

Follow the easy steps given below to apply Credit Memo in QuickBooks manually-

Step:1 Open QuickBooks online and click on the +New option.

Step:2 Then, select the receive payment option.

Step:3 Next, click on the customer option from the receive payment menu.

Step:4 Here, click on the name of the customer whose credit memo you wish to create. 

Step:5 Please click on the invoice to which you wish to apply the credit memo in the outstanding transaction window. 

Step:6 From the Credits category, click on the credit memos you wish to apply. 

Step:7 Enter the amount of the credit you wish to apply to the open invoice in the Payment field.

Step:8 Keep the Reference no, Amount received, Payment method and Deposit to sections empty.

Step:9 Enter the payment date and finish filling out the rest of the form.  

Step:10 Please check all the details and the amounts you have typed in your entry. Also, ensure the credit memo amount tallies with the original amount.

Step:11 Once you finish the above-given steps, click on save and close.  

Great! Now you know how to apply a credit memo on a freshly created one. You can try this method on multiple credit memos; the steps will remain the same. 

How to Delete Credit Memo in QuickBooks?

If you wish to delete the credit memos, follow the steps given below –

Step:1 Open QuickBooks online.

Step:2 Select Ctrl+H keys on your keyboard.

Step:3 You will be able to view the history of Credit Memos. 

Step:4 Next, double-click on the invoice you wish to delete. 

Step:5 Click on the Apply Credit option.

Step:6 In the Previously Applied Credits page, click on the delete option for the current credit choice.

Step:7 Then, click on the save and close option.  

Great you have now successfully deleted your transaction with this customer.

Difference between Credit Memo and Refund

People often misunderstand and mix up the meaning of the terms credit memo and refund. They are not the same. To understand this concept, let us go through the definitions of both terms. 

Credit Memo: A credit memo is a commercial document in which the amount owed by the buyer to the seller is affected. Suppose a buyer owes you money and has not paid you until now due to issues such as a marketing allowance, pricing dispute, or some miscellaneous reasons. In that case, you can create a credit memo, after talking to the buyer, reducing the actual invoice amount and ask him/her to pay that reduced amount. 

Refund: Refund is the amount seller owes to the buyer in case of a return. If a buyer has paid the entire amount for a product he/she purchased from a seller, but is unsatisfied after the delivery and returns the product, the seller owes him/her a refund.

FAQs on Appling Credit Memo in QuickBooks

How to Create a Credit Memo in QuickBooks?

To create a credit memo in QuickBooks online, click the +New button and select Credit Memo. Next, select the customer option and choose the name of the customer you wish to apply the credit memo to. Enter relevant details such as the credit amount, date, etc. Once you enter the details, click on save, then close the window.  

How to Apply a Credit Memo to Payment in QuickBooks?

In QuickBooks online, Click on the invoice you wish to pay. Look below the invoice in the unused credits window, there click on Apply Credits. Now, available credits would appear on your screen. Please click on the credit you wish to apply. Once done, save and close. You have successfully applied a credit memo to payment in QuickBooks online. 

What Accounts does a Credit Memo Affect in QuickBooks?

A credit memo affects accounts receivable in QuickBooks online. Here the credit memo reduces the amount the customer owes to the seller. 

Wrapping Up

Amazing! Now you know how to apply a credit memo to a transaction, how to delete it and the exact difference between refund and credit memos. You can contact the QuickBooks support teams if you encounter any issue or post a query on their website, and you will be assisted shortly.

Happy Accounting!