Apply a purchase credit note
Applying an issued purchase credit note matches its credit against one or more purchase invoices, reducing what you owe on those bills. The purchase and VAT accounting happened when the credit note was issued; applying moves the credit from the credit note onto the bills you apply it to, and lowers their outstanding balance.
A credit note that names a bill when you record it is applied to that bill as soon as it is issued — as far as the bill still owes; anything more stays on the supplier's account (see Create a purchase credit note). So you only apply by hand a credit note that names no bill, or whatever credit remains. Until it is applied, an issued credit note appears on the Aged Payables report as its own negative row.
Before you begin
- The credit note must be Issued and have credit remaining. See Create a purchase credit note.
- There must be an Issued purchase invoice with an outstanding balance, from the same supplier and in the same currency as the credit note.
Apply the credit note
- Go to Purchases → Purchase Credit Notes and open the issued credit note.
- Select Apply to Invoice.
- In the window, choose the Purchase Invoice from the list (only same-currency bills are shown). Its outstanding amount is displayed.
- Enter the Amount to Apply — up to the smaller of the credit note's remaining credit and the bill's outstanding balance.
- Add Notes if useful and select Apply Credit Note.
Repeat to spread the credit across more than one bill.
[Screenshot required: Apply Credit Note to Purchase Invoice window showing the invoice selector and amount field]
What happens next
- The chosen bill's outstanding balance goes down by the amount applied, and its payment indicator updates (Partially Paid or Fully Paid).
- The credit note shows its Application Status — Not Applied, Partially Applied or Fully Applied — along with the Amount Applied and Remaining Amount.
- Each application is listed on the credit note under Credit Applications, with the invoice, amount, date and who applied it.
Note: Applying records one small journal on your accounts payable control account: a debit against the bill and a credit against the credit note, which cancel, so your total creditors do not change. No purchase or VAT entries are created — those were recorded when the credit note was issued. The journal is dated the later of the credit note's and the bill's dates, so a posting lock covering that date stops the application. For a foreign-currency credit note and bill at different exchange rates, the difference is posted to foreign exchange gains or losses. Unapplying reverses the journal.
Important notes
- You cannot apply more than the remaining credit, nor more than a bill's outstanding balance.
- Unapply a credit note if you applied it by mistake. On the purchase credit note's details page, each row in the Credit Applications list has an Unapply button. Unapplying removes the credit from that bill and adds the amount back to the bill's outstanding balance; the credit becomes available to apply again.
- To void an applied credit note, unapply it first. Voiding a purchase credit note is blocked while it is applied to any bill. Use Unapply on each application, then void the credit note.
Troubleshooting
- The Apply to Invoice button isn't shown. Applying is only offered on an Issued credit note that still has credit remaining. A fully applied credit note has nothing left to apply.
- A bill isn't in the list. Only Issued, same-currency purchase invoices from the same supplier with an outstanding balance can be chosen.
- A currency mismatch message. A credit note can only be applied to a bill in the same currency. If the supplier's credit is in a different currency from the bill, they cannot be matched here.
- "More than the bill owes." Applying by hand takes no more than the bill still owes. Enter that amount or less; the rest of the credit stays on the credit note, to apply to another of the supplier's bills.
- "Already paid in full." The bill has nothing left on it. The credit stays on the supplier's account — apply it to another of their bills.