Customer Credits
Customer credit is provided in the form of a customer credit memo. The amount of a credit memo can be applied toward an invoice to decrease the amount the customer owes you.
For example, Joe Smith returns two widgets to you that he originally bought for $100 each. When you receive the widgets, you issue Joe a credit memo in the amount of $200. Later, Joe purchases five widgets from you. The invoice total is $500, but when he applies the $200 credit memo, the total Joe is due to pay is only $300.