do you receive credit memos that decrease what you owe to vendors if that's the case then you
should watch this video all about credits from vendors if you have any questions about this
topic you can leave them in the comment section below and I'll do my best to help you and of
course if you feel the video helped you I hope you will click like and don't forget to subscribe
to get updates on new videos that come out all the time vendor credits are when a vendor gives
you a decrease for what you owe them for a past service or product that was purchased the effect
is the exact opposite of a bill so what exactly happened when you entered the original bill well
accounts payable went up because you owed the vendor more as a result of receiving that bill
and the specific expense that you were getting the bill for also increased at the moment you recorded
entering that bill so then what happens when you make a vendor credit well it's the exact opposite
accounts payable goes down because you owe the vendor less and the specific expense that you
got credit for decreases because you have less of that expense because you paid less because
you just got a credit for that expense now usually the vendor credit is given for a specific unpaid
bill and you would usually apply the credit to that bill at the moment that you pay the rest of
the bill for example let's imagine on April 11 rex repair shop gave us $300 credit for billed
number eight for a four that we received back in February on April 12th we'll imagine that we paid
Rex repair in full for that bill and used the credit that we got from April 11 so let's take
a look at how to record these two transactions now before we enter the bill you should know
that the most important report in this section is the unpaid bills report and will we take a
look at the section of the unpaid bill report specifically for Rex repair we could see that
these are the three bills that this this February 13th bill number 8 - 8 - is still open for $700 so
now we will record the vendor credit we click the plus sign we go over to the column of vendors and
we click vendor credit now we know that the vendor is Rex repair shop and we know that the date they
gave us credit was April 11 and don't forget to put 2017 now it is very very important that you
put the same expense on the credit as what you put on the original bill with rex repair it's easy we
only have one expense that could possibly be the repair expense and the amount of the credit $300
okay we will remove the billable check mark and talk about that another time but right now this
is what your vendor credit window would look like and you're basically finished recording the credit
now at the moment you click Save and close you can come back to the unpaid bills report and you can
see that for rex repair there is now a vendor credit that decreased Rex ballads for 300 now
let's go ahead and record the payment did full of the bill the very next day April 12th and you will
see how to apply the credit from April 11 so it's very simple we click the plus sign we go over to
vendors and we click pay bills now we know the date in our little story that we're paying the
bill is April 12th of 2017 now we know that the we have to click this filter button here instead
of the last 365 days show all dates and make sure you only focus on the one vendor you're looking
for Rex repair after you apply you will see that there are three open bills now look closely how
we apply the credit if we click once in this box what QuickBooks Online will do is tell you the
total available credit now we know we only gave one credit of three hundred but that would be the
total of all possible credits available and you have to physically type in the amount of credit
you're taking from the total credit available and if we're taking the total of three hundred
credit available that means the payment has to be four hundred dollars and this is the amount
that will decrease the bank account after we click Save and close when we go back to the
unpaid bill report we see that both the credit and the bill that the credit was applied to both
disappeared because the bill was paid and four hundred dollars was deducted from cash in Bank
now you may well ask how does QuickBooks Online apply credits when there are multiple credits
available well if there's more than one credit available quickbooks online only shows the total
available credit in the pay bills window if less than the total credits are used in one
bill payment a proportional amount will be applied from each credit for example let's
imagine on April 13th con Edison gave us credit number eight for seven - for $200 for future use
not associated with any past bill and let's imagine on the very next day they gave us
another credit for $100 and that would also is not directly associated with any past bill let's
just go ahead and record these two credits and remember in New York City con Edison is the one
that gives us electric expense so now we click the plus sign we go to the column of vendors and
we come down again vendor credit now again this is con Edison and con Edison in New York gives
electric expense and the date this time is April let me see what's the date here yeah April 13
of 2017 and I think the reference numbers really should be the number on the credit document that
they gave us eight four seven two okay little reference to Star Trek okay very good so now
the money amount of this credit is two hundred dollars so would we fill out this credit and
we click Save and close we go back to the unpaid bill report now we have one vendor credit for con
Edison now the other one was on the fort 8 for 9 1 for $100 that should be very easy to record
the vendor credit April 14th con Edison Electric expense must be the same expense that's on the
bill what is it 8 for 9 1 or something whatever it is yes Edie the amount of this credit is
$100 this credit looks just like the others save and close now con Edison now has 2 credits
and the reason they are showing up on the unpaid bill report is because they have not
yet been applied to any of the unpaid bills now let's imagine on April 15th we applied
$100 of credit the con Edison credit that they gave us specifically to build number eight one
eight one and you will see what happens so before we apply $100 credit to build number
eight one eight one that particular bill is two thousand dollars so when we finish that should
decrease to one thousand nine hundred dollars in the amount that's actually opened and you will
see that a proportional amount will be applied from each of these two credits so we click new
and we click pay bills because that's how we normally apply it we want to filter and make
sure we have all dates but we only need to see con Edison now we know we're applying it to this
bill eight one eight one now look carefully this is very ooo gotta make the payment date April 15
and remember we're in 2017 in our little story but here's the mall interesting point the most
interesting point is that we know we're paying bill eight one eight one and if we click here
it says 300 available it does not list the individual credits in there open amounts
it simply says the total available now we are only applying 100 and push tab and we are not
I repeat we are not paying the rest of the bill if you are only applying and you are not paying
any of the bill make the payment amount zero this way you don't pay anything on April 15th
you're not changing your bank balance on April 15th you're not even changing the balance of the
vendor you're simply applying this credit to this bill now look what happens when we click
Save and close we go back to con Edison and we see that thirty-three dollars has been taken
from this hundred dollar credit and sixty six dollars and 67 cents has been taken from this
credit in other words they simply took a third of the first credit excuse me two thirds of the
first credit and two thirds of the second credit are left over because a hundred dollars of credit
is a third of the 300 in total so I hope you understand how it's taking proportional amounts
when you apply the credit and notice the two thousand dollar bill has now decreased to $1,900
you