It's nice to have you as part of the conversation, @LeahC,

I can share some insights on how to correct your vendor balance from a previous period.

You're correct. You can offset the credit by creating a bill. A bill Debits the account then increases A/P balance. Here's how: 

1. Go to the Vendors and select Enter Bills.
2. On the Items tab, enter the item you want to refund.
3. Hit Save & Close
   

Once done, apply the available credit to the bill.

1. Go back to the Vendors menu.
2. Select  Pay Bills.
3. Locate and select the bill that you entered to offset the credit.
4. Press the Set Credits button.
5. Choose the Credits tab and select the credit.
   
6. Hit Done to close Discount & Credits window.
7. Choose Pay Selected Bills to close the Pay Bills window.
8. Click Done.

That should get your work done, @LeahC. You may want to check this article to learn more about correcting customer and vendor balances: Write off customer and vendor balances

I want to ensure your vendor balance is correct, please let me know how it goes by leaving a comment below. I'll be keeping an eye out for your response. Have a great weekend!