How to Reverse or Unapply a Credit Memo in QuickBooks?

Have you applied a credit memo to an incorrect invoice, or are you getting an error? Learn how to unapply a credit memo in QuickBooks Desktop so your customers can use the credit on their next purchase or as a discount.

A credit memo lets a buyer manage the amount they owe to their customers by applying it to the next purchase or by adding a memo in the accounting system to keep the data accurate and balanced.

Explore this guide to learn how to unapply a credit in two different ways: from an invoice or a bill & related FAQs.

What is a Credit Memo in QuickBooks?

A Credit Memo or Credit Note is a way to manage customer credit. It is a document that reduces the amount they owe you. This note serves as store credit for overpayments, product returns, or service adjustments, and can be applied to future or open invoices instead of issuing cash back.

This lowers the Accounts Receivable, not the cash. Creating a credit memo on the customer’s account helps businesses in managing their books accurately without altering past invoices.

There are primarily two ways to handle the credit memos in QuickBooks. You can either:

• Simply create a credit memo that immediately reduces the customer current balance.
• Or, enter the delayed credit to use it in the future.

How to Credit or Unapply a Credit in QuickBooks From an Invoice and a Bill?

In the below section, we will walk you though the detailed steps on how you can create a credit memo or unapply a credit from an invoice or bill in QuickBooks Desktop.

Create a credit or refund in QuickBooks Desktop

You can either simply refund the value or create a credit memo. As we are discussing about credit memo, we will only be creating a credit memo here.

a. Create a credit memo

• Choose Create Credit Memos/Refunds from the Customers menu.
• Choose your customers from the Customer:Job dropdown.
• Enter the items you are giving a credit for to your customers, then click Save & Close.

b. Choose how you want to handle the credit

In the prompted Available Credit window, choose the following and click OK.

• Keep as credit: QuickBooks puts a negative amount in your Accounts Receivable (A/R) to show the credit memo. You can use this credit to pay for another transaction later. If you keep it as available credit, you’ll see it in the customer payment window.
• Give a refund: You can refund the customer with cash or a check. If they paid with a credit card, you can also refund to their credit card.
• Apply to an invoice: QuickBooks will show a window where you can choose an invoice to apply the credit to.

Let’s apply the credit to the invoice, and we will leave the remaining amount as available credit and a refund:

i. Apply a credit to an invoice

• Make sure to select Customer: Job when applying a credit memo. This will prompt you to the Apply Credit to Invoice window.
• Choose the credit you wish to apply automatically and click Done.

Remove a credit from an invoice

Here’s how you can remove a credit memo from an invoice if you wrongly applied the credit memo or customer has cleared it.

• Open the credit memo/note you wish to unapply from the invoice.
• Press the Ctrl + H keys to display the transaction history.
• Double-click on the invoice and choose Apply Credits.
• Clear the checkbox for credit you want to remove in the Previously Applied Credits window.
• Click Done.
• Finally, select Save and Close on the invoice.

Remove a credit from a bill

Let’s see how you can simply remove a vendor credit from a bill:

• Locate your vendor credit.
• Choose Bill to change the credit into a bill and click on Save & Close.
• Open the bill and choose Credit to change it to a credit, then select Save and Close.
• Click Yes on the prompt about changing the location.

Conclusion

With this detailed guide, you will learn how to unapply a credit memo in QuickBooks Desktop. This ensures that your credit memo information remains accurate while still providing your customers with the credit or specific discount.

Getting an error or have further queries? Contact QuickBookSupportNet at +1(866)500-0076 to consult your issues with QB ProAdvisors now!

Frequently Asked Questions

Can a credit memo be reversed?

Yes, a credit memo be reversed by unapplying the credit memo or simply by deleting them. You can unapply the credit memo either from an invoice or a bill.

How to apply an unapplied credit memo in QuickBooks?

Applying an unapplied credit memo is same as applying a new credit memo. Go to +New > Receive Payment feature, choose the customer, then link the credit memo to the specific invoice you want to credit, marking the invoice as paid or partially paid.

When can I use a credit memo in QuickBooks?

You can use a credit memo in QuickBooks if your customer is eligible for a refund, a return, a balance adjustment for returns, order cancellations, or as a reward/incentive. This lets you adjust the invoice without changing the original records.

Can I delete a credit memo in QuickBooks?

Yes, QuickBooks allows you deleting a credit memo. but it’s often better to void it or unapply it if it’s already linked to an invoice, as deleting removes it entirely. Voiding a memo means it clears the transactions but keeps the record for further references.