How to apply vendor credit in QuickBooks Online?

vendor credit in quickbooks

The vendor credit in QuickBooks Online used to record the transactions related to vendors in QuickBooks. In case you have received a vendor refund or bill credit, it may be recorded as a vendor credit in QuickBooks. In this article, we shall see how to apply vendor credit in QuickBooks Online.

Vendor credit in QuickBooks is considered to take place when the vendor is unable to pay for the goods and services that you are providing to the person concerned. In other words, it is the outstanding amount that the vendor owes to you, ie. the supplier. QuickBooks enables you to track the pending amount until the vendor completes the transaction that is owed.

The actual process to apply vendor credit in QuickBooks Online

  1. Enter the Vendor Credit

You need to create a new vendor credit.

  1. Press on + New. Under the list of Vendors, you can click on Vendor Credit.
  2. From the page which opens, you need to select the name of the vendor from the drop-down menu.
  3. Check all the invoices, sales receipts for which you have credit. You need to select the concerned bills, the details of the category which they come under. You also need to check the item details, depending on the manner in which the purchases have been recorded.
  4. There will be a vendor credit window. You need to enter the amount of credit that applies to the bills.
  5. Once the vendor credit has been entered, you can press on Save, and close the dialogue box.

2. Record the Bank Deposit

The next step is to record a bank deposit for the vendor check, or credit card payment, which needs to be linked for payment to the vendor credit.

  1. Press on +New. Under the heading of “Other”, select “Bank Deposit”.
  2. Navigate to the deposit section, and select the credit card account. This should be where the refund check was deposited.
  3. The window that subsequently opens should be of “Add funds to this deposit”. You need to enter the details of the refund here.
    I ) Under the section “Received from”, you need to select the vendor.

    2.) From the “Account” column, select “Accounts Payable”. Although a credit is being recorded, the bill credit is from the vendor rather than the customer.

    3 )  Under the “Payment Method” sub-section, you can enter the payment method which was used for the vendor credit.

    4 ) In the column concerning “Amount”, enter the amount of refund that is being sought.

3. In the final step, you need to create a link between the bank deposit and vendor credit, using Pay Bills, so that the credit may be applied to the balance.

  1. Press the option for +New, and go to “Pay Bills” under the Vendor tab.
  2. The bank deposit that has just been created needs to be selected. The amount of the vendor credit shall appear in the tab “Credit Applied”.

3. You need to ascertain that the “Total Payment” section is showing $0.


1. How can you apply vendor credit in QuickBooks Online to a customer invoice?

To apply vendor credit to the customer invoice, you have to navigate to the Customer menu, and then press on “Receive Payments”. Select the invoice for which you want the credits to be added. You have to “Set Credits” and click on credits to apply.



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