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Re: "While the instructions to post as AR make sense, A/R is...

This is an Error and you just did the same entry twice using two different methods: "I advised them of my mistake (sent a credit note),"

Credit Note = makes negative AR

Overpayment, if you used receive payment, also created negative AR

= Twice the negative AR, from two different methods.


Delete the credit memo. Apply the overpayment you already have to the Invoice they underpaid. You should have applied it when you first made the invoice that was going to use it, to show the customer only the $300 was left owed.


"and this month they deducted the $1000 overpayment from our $4000 November invoice, resulting in a new deposit for $3000."


Delete the Credit memo. Your current Negative AR for the customer of $1,000 for the overpayment gets applied to the $4,000 invoice; that leaves $3,000. Now process their check.