We have a client that was invoiced and the client paid the deposit amount. A few weeks later, the client decided to cancel the service and we issued a check in the amount of the refund. 

We then did the following steps: 

• Select +New
• Under customers, select 'credit memo'
• Selected the name of the customer on the invoice
• Enter the entire amount of the invoice, including the deposit
• Clicked save & close
• Check was already created 
• Then recorded the credit memo payment:
• click +New
• Under customers, select 'receive payment'
• selected the name of the client on the invoice
• entered the credit memo amount, 
• click save and close

This did not work. Essentially, the initial deposit is still showing in the account. The Credit Memo shows as 'unapplied' and now the balance is in the negative. See screenshots.

Can someone please help me figure out what the issue is here or where we might have missed a step in the process? 

If anyone on QB Online can help with this, I'd appreciate it. In the past, this was a simple thing to process. Thanks!

Screenshots: