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Level 1

Unapplied Credit Note

Hi All


I am new to the latest Quickbooks and I am struggling applying credit notes. What does this mean? Here is my problem. I have received a payment for 10 Invoices and 1 Credit Note. How do I match these items? Do I have to apply the credit note to one of the invoices? I just want to keep it as clean as possible so I can understand going forward. With the old system (Quickbooks Pro) I could pick up the credit notes in a seperate tab.


Could someone help me with the best way forward?



QuickBooks Team

Unapplied Credit Note

Hello there, Matt42.

Thanks for being part of the QuickBooks family. I’m here to provide some information on how to use the credit note.

Congratulations on your new QuickBooks version. The credit note can be issued to track sale, payment, return an item, as a refund or retained in your customer account, and etc.


The process also depends on how you want to apply it to the invoice. Here's how to create the transaction.


  1. At the top menu bar, select Customers.
  2. Choose to Create Credit Notes/Refunds.
  3. Click on the drop-down for Customer: Job, and select the customer you’re working on.
  4. In the Item column, enter the returned items.
  5. Choose Save & Close.
  6. Once the Available Credit window opens, choose how you want to use the credit note.
    *Retain as an available credit - QuickBooks enters a negative amount in your A/R register for the credit note and uses this credit as payment for another transaction.
    *Give a refund - You can issue the refund as cash, a cheque, or a card refund.
    *Apply to an invoice – This will open the Apply Credit to Invoices window where you can select an invoice to which you want to apply for this credit.
  7. Click OK.

Please know you can apply the credit to invoices as long as it does not exceed the amount.

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To help give you a better idea on the workflow, check out the Record a credit note or refund in QuickBooks Desktop article.


There you go. After following these steps, your records should be in tiptop shape.

Let me know how this turns out, or if you have any other concerns. I'll be right here ready to help.


Level 1

Unapplied Credit Note

Hi Rasa-LilaM


Apologies for the length in time coming back to you.


Thank you for your pointers. Makes sense and I have started to match supplier invoices against payments that have landed via the bank feeds that are now up and running.


I use other platforms and what I find strange with QuickBooks is the category tab when I am matching transactions in the bank feed. I understand the concept of the chart of accounts, so for example I have a payment to an employee which has come out of the bank. When its says category do I put that to 2220 - Net Wages? I just want to make it right for the accountant.


Another example is I am matching a payment from a customer. Is the category for that 4000 - Sales as its a sale or does it go against 1200 - The main bank? 


This is just confusing me so could you confirm?


Many thanks




Level 3

Unapplied Credit Note

Looks like you've used Sage before or your accountant did, hence the codes. Payment of net pay is paying off a liability and should therefore go to net pay owed (2220 on Sage). It is the gross pay that is a cost in the profit & loss account. A receipt from a customer is not income, it is that customer merely clearing their liability to you, the income occurs when you raise the invoice to them. An sales invoice's double entry is credit sales (4000) debit accounts receivable (I appreciate the software id doing the double entry for you). the double entry for a customer payment is debit bank, credit accounts receivable. Those bank receipts should be allocated against the outstanding sales invoices.