To be able to apply a credit memo a Trust Account will need to be setup in the General Ledger. A trust account is where all credit memos, deposits, and pre-payments will be allocated until a time as they are assigned against a particular invoice.

From an Invoice screen click on the New Payment icon

On the payment screen be sure there are no allocated items listed.

Enter in the amount of the Credit and any reason (credit for shipping charge, etc.). Check off the payment type. Click the Save icon. Check off the print option if a receipt of Deposit needs to be emailed to the customer.

The following prompt will appear next.

Click Yes. The invoices screen will show the Deposit/Pre-payment as a listed item in that screen in blue and labeled 'Pre-Payment. The example below is highlighted.