Credit notes are used to reduce the amounts owed to suppliers from previous invoices. For example, if you have received an invoice for goods you have purchased but the goods have not been delivered, your supplier will issue a credit note to reduce the value of the original invoice (or clear it completely depending on the circumstances).
How to enter credit notes issued to you from suppliers
Supplier credit notes are entered in a similar way as supplier invoices. Go to Supplier > Supplier Credit Notes > New Credit Note.
Select the supplier from the Account column.
Use the same category as the original invoice – if necessary use the split button at the end of the line if there was more than one item.
Pick the original invoice reference from the drop down list under Inv.Ref, and then complete the description and amount to be credited.
Once this has been saved, you will notice that the amount you owe to your supplier will reduce by the credit note amount.