For what ever reason you may at times have a customer who has a credit and tells you to keep it, now what?

The first thing to understand is that QB does not keep the customer credit in a current liability account as it should, after all when the company owes someone it is a liability. But no, QB decided that rather than account for the credit in an accepted manner they would just leave it in the Accounts Receivable. That means that every customer credit you have is lowering the Accounts Receivable balance (A/R). This also mean it is conceivable to have a negative A/R if all invoices have been paid and there are customer credits.

So how to erase the customer credit without adding income? After all when you accepted the overpayment, or issued a credit memo, income was accounted for then.

* Create an income account and call it donations. If you are ever audited this might explain why you didn’t collect sales tax on it.
* Create a Service item called something like “customer donations”, mark it as non-taxable and point it to the donation income account.
* Bring up the report, Reports>Customer and Receivables>Customer Balance Summary. ANY negative balance is a credit balance.
* Create an invoice for the customer, for the item enter “customer donations” and a qty of one, and the amount of the credit balance in the above report. at the bottom click apply credits. Click save.

That zeros out the customer credit, and does not affect the financial accounts other than removing the negative entry from A/R.