How to Create a Credit Memo in QuickBooks?

Create a Credit Memo in QuickBooks

Do you want to transfer the credit to your customer? If so, you will have to prepare a credit memo for that. To know how to create a credit memo in QuickBooks, stick through this guide till the end.

Here, you will also understand how to enter a vendor credit memo in QuickBooks, generate QuickBooks open credit memo reports, and print credit memos if required in the future. So, let’s get started!

Content Summary

The blog enlightens you about Credit Memo in brief. A credit memo can be applied to different conditions. Here, you will discover how to create and apply the credit memo in QuickBooks Online and QuickBooks Desktop.

What is a Credit Memo in QuickBooks Online?

QuickBooks makes your business quite convenient as it provides several services or features. Credit Memo is one of them. If you are concerned about “how does a credit memo work in QuickBooks’, we will enlighten you.

If your customers return the items they have purchased before and also for which they have paid you then it is required to enter the cash memo for that particular customer.

In case, a customer overpays the invoice then a refund check is needed to be issued. A credit memo can be created in both QuickBooks Online and QuickBooks Desktop.

However, it depends on what condition you can create or wish to apply the credit memo. For instance, a credit memo can be applied for different purposes such as overpayments and returned items.

In this particular guide, we will enlighten how to create and apply the credit memo in QuickBooks Online and Desktop respectively.

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How Do I Create a Credit Memo in QuickBooks Online?

If you use QuickBooks Online and wish to create a credit memo then you can do it in a few simple steps which are as follows:

  • Login to your QuickBooks Online account.
  • Click on the “Plus”/(+) icon located on the top.
  • Then, click on the “Credit Memo” option.
  • PIck your customer name for whom you want to create a memo.
  • Then, add the “Credit Memo Date”.
  • Enter the required information.
  • Hit the “Save and close” button.

Once you add and save all the necessary details, your credit memo will be created successfully. Thereafter, you are ready to apply this credit memo to the invoice for the selected customer.

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How to Apply Credit Memo QuickBooks Online?

Since you have learned how to make a credit memo in QuickBooks, now you should learn the procedure for applying credit memos to invoices in QuickBooks Online. For better clarification, pursue the following steps stated below:

  • In your QuickBooks Online, go to the “Sales” located on the left.
  • Now, click on the “Customers” option.
  • Pick the name of your customer.
  • Find the invoice to which you want to apply the credit memo.
  • Then, hit the “Receive Payment” option.
  • Now, go to the “Outstanding Transactions” section, and make sure that you have selected the right invoice.
  • Hit the ”Save and close” option.

This is how you can issue credit memo in QuickBooks Online. All you have to do is choose a customer and pick the correct invoice to apply your credit memo.

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How to Do Credit Memo in QuickBooks Desktop?

Those who prefer to use QuickBooks software can also create a credit memo for their customers. To know the procedure of creating a credit memo for the returned items, you can follow these steps discussed below:

  • Launch QuickBooks Desktop.
  • Go to the “Customers” menu.
  • Click on the “Create Credit Memos/Refunds” option.
how does a credit memo work in quickbooks
  • Then, select the customer using the “Job” dropdown.
  • Now, in the “Line item” section, add the returned items.
  • Hit the “Save & Close” button.

Now that you have created a credit memo, you should also know how to handle or use this credit for your customers. In the Available Credit window, you will find the following options. These options serve different purposes. Let’s understand how does a credit memo work in QuickBooks using these credit memos with a step by step guide.

Retain as an Available Credit

QuickBooks adds a negative amount for the credit note in the Accounts Receivable (A/R) register. This credit can be used as payment for another transaction. In case you choose to retain it as the available credit then it will be displayed in the Customer Payment window.

If you want to retain a credit memo as the available credit in QuickBooks then you can follow these steps stated below:

  • Go to the “Customers”.
  • Then, click on the “Receive Payments” option.
  • Pick a customer using the “Received from” dropdown.
  • Then, click on the “Discounts and Credits” option.
  • Mark the credit for which you wish to apply from the “Credit” tab.
  • Hit the “Done” button.
  • If you see a confirmation prompt then hit the ” Yes” button. Doing so will apply the amount to the invoice automatically
  • Then, click on the “Save & Close” button.

Give a Refund

If you choose this option to refund then the refund can be issued in a check as well as in cash or even on a credit card. To use this option, pursue the steps mentioned below:

  • You will find the check filled automatically.
  • Then, click on the “OK” button.
  • Now, link this check to overpayment.
  • Click on the “Customers” option.
  • Choose the “Receive Payments” option.
  • Pick the “Customer” using the “Received from” dropdown.
  • Click on the “Discounts and Credits” option.
  • When you see the “Available Credits” section, choose the check that you just created.
  • Hit the “Done” button.
  • When you see the confirmation prompt, click the ”Yes” button. This will apply the amount to the invoice automatically
  • Then, click on the “Save & Close” button.

Apply to an Invoice

If you want to know how to apply credit memo to invoice in QuickBooks Online, look for the following steps mentioned below:

When you choose to apply a credit memo to the invoice, you need to make sure that you choose the Customer: Job option. Doing so, QuickBooks opens an Apply Credit to Invoices window.
Thereafter, you can pick the credit to apply it automatically for the customer.
Then, hit the Done button.

Apply Through the Write Checks Window

When you create a credit code, it can also be applied through the write checks window. To understand better, you can go pursue the following instructions:

  • Click on the “Banking” menu.
  • Then, click on the “Write Checks” option.
  • After that, fill in the required information.
  • Now, pick the customer using the “From the Pay to the order of” dropdown.
  • Here, enter the overpayment in the “$” field.
  • Now, switch to the “Expenses” tab.
  • Click on the “Accounts Receivable” option using the “Account” dropdown.
  • Select the “Customer” using the “Customer: Job” dropdown.
  • Click the “Save & Close” button.
  • Now, link this check to overpayment.
  • Click on the “Customers” option.
  • Choose the “Receive Payments” option.
  • Pick the “Customer” using the “Received from” dropdown.
  • Click on the “Discounts and Credits” option.
  • When you see the “Available Credits” section, choose the check that you just created.
  • Hit the “Done” button.
  • When you see the confirmation prompt, click the ”Yes” button. This will apply the amount to the invoice automatically
  • Then, click on the “Save & Close” button.

These are the certain purposes of choosing these different options for applying credit memos. Depending on your requirement, you can pick these options such as retain as available credit, give a refund, or apply to an invoice. If required, you can also apply the credit memo through the Write Checks window. Now you have learned how to apply a credit memo in QuickBooks Online and QuickBooks Desktop.

How to Enter a Vendor Credit Memo in QuickBooks?

In case you refund a vendor for the product or services that is returned then you are required to create a vendor credit. It is also known as a debit memo. This can be used to make payments.

If you want to know how to merge a vendor and how to create vendor credit in QuickBooks, you can follow the instructions mentioned below:

  • Click on the “Vendors” menu.
  • Then, click on the “Enter Bills” option.
  • After this, select the “Credit” option instead of the “Bill” option.
  • Choose the “Vendor name”.
  • Now, switch to the “Expenses” tab.
  • Then, enter the “Accounts” option on the original bill.
  • When you see the “Amount” column, add the amount.
  • Hit the “Save and Close” button.

These are the steps for how to create credit memo for vendor in QuickBooks. All you have to go to the Vendors option and add the amount.

How to Find Credit Memos in QuickBooks?

Most users have this question if they can view the credit memos and print them. If you have the same inquiry then the upcoming discussion is for you.

Credit memos can be found in the transaction list in the Customer Detail section. If you want to find the credit memos in QuickBooks, you can take help from the following steps:

  • In your QuickBooks account, go to the “Sales” located on the left.
  • Then, click on the “Customers” option.
  • Select the “Customer” option from the list for which you want to print the credit memo.
  • Now, in the “Transaction List”, you can find the credit memo.
  • Click on the memo to select it.
  • Then, select the “Print or Preview” option located at the bottom of your screen.
  • Hit the “Print” button located at the bottom right.

This is how you can view the credit memos you have created before in the Transaction List. If it is required to print the memos then you can do that in just a few clicks.

How to Generate a QuickBooks Credit Memo Report?

QuickBooks allows you to pull up the list of the transaction and the report of other details. This will help you to customize the reports. This can be done to show credit memos for both the Customer and the Vendor. Let’s understand the procedure of creating a credit memo report to run it.

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Transaction List by Customer

  • Click on the “Reports” option.
  • Go to the “All Reports” tab.
  • Click on the “Review Sales” option.
  • Choose the “Transaction List by Customer” option.
  • Select the “Customize” button.
  • Click on the arrow located next to the “Filter”.
  • Hit the “Transaction Type” dropdown menu.
  • Then, click on the “Credit Memo”.
  • Hit the “Run Report” button.

Transaction List by Vendor

  • Click on the “Reports” option.
  • Choose the “Vendors & Payables” option.
  • Choose the “Transaction List by Vendor” option.
  • Select the “Customize Report” button.
  • Click on the arrow located next to the “Filter”.
  • Then, customize the report with date, name, transaction type, and posting status.
  • Hit the “Transaction Type” dropdown menu.
  • Click the “OK” button in order to run the report.

This is how you can generate and run the report. Now that you have added the memo line so the second report will provide the details. For that, you can follow these steps:

  • Click on the “Reports” option.
  • Choose the “Accountant & Taxes” option.
  • Then, select the “Transaction Detail by Account” option.
  • Hit the “Customize Report” option.
  • Click on the “Filters” option.
  • Here, you need to make sure that you customize the detail by “Date” and “Transaction Type”.
  • Hit the “OK” button.

Once you follow these steps, the detail appears based on the filters you have applied. Thereafter, you can analyze the details.

Closing Up

Credit memo has a vital role in QuickBooks as it allows you to refund the amount to the customer for the items they have returned. A credit memo can be used for different purposes. For instance, you can choose to give a refund, retain the credit as the available credit, and apply the credit to the invoice.

In this guide, we have taught what is a credit memo and how to create a credit memo in QuickBooks Online and QuickBooks Desktop. Once the credit memo is created, you can apply it to the invoice for your customers.

Apart from this, you can enter the vendor credit memo after creating it. If it is required then you can view and print your credit memos for the record. QuickBooks users can also generate credit memo reports for customers and vendors.

Hopefully, you find our guide useful!

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