For customers attempting to apply a credit from the invoice payment screen:

The invoice payment screen was designed to interact with itself only and not able to apply logic to other invoices. If the original invoice was number 1 and a refund was applied on invoice number 1. The new invoice is number 9. We can not apply a credit from invoice number 1 to new invoice number 9 from within the invoice payment button screen. This is what the receivables screen is for.

Here are your steps:

1. Original invoice is generated selling a starter for $100.00 with a core charge of 25.00. Payment is made for a total of $125.00.

2. A number of days later the customer returns with the core and is refunded the $25.00 which applies to his account.

3. After some time the customer returns to purchase another starter for $150.00. You go into payment screen to make a payment for 125.00 leaving an outstanding balance of 25.00 on the invoice.

4. You accounting person the same day or whenever goes into receivables / receipts / enter cash receipt. Select transaction type adjustment and the amount field will be left blank. You will then proceed to click on the pay button and first select the credit for 25.00 and click on the pay button. Next select the open invoice that was originally 150.00 and a balance of 25.00 and pay it. The debits and credits will balance out to $0.00.

Here are a few screen shots going through a scenario with a customer: