---
sidebar_position: 3
title: Credits, Refunds & Prepayments
description: Managing credit notes, customer deposit liabilities, merchant refunds, and unapplied cash balances.
keywords:
  - credit notes
  - customer refunds
  - prepayments
  - customer deposits
---

# Credits, Refunds & Prepayments

**Credits, Refunds & Prepayments in GAAPx** manages the lifecycle of customer concessions, service credits, payment reversals, and prepaid retainers while maintaining strict audit trails in the AR subsidiary ledger.

:::info SCREENSHOT PLACEHOLDER: Credit Memo Creation & Allocation
**Location in App**: `App > Billing > Credit Memos > Create`  
**Visual Description**: Modal showing credit memo creation linked to original invoice, selecting refund vs. apply-to-open-balance.  
**Recommended Dimensions**: `1200 x 675`  
:::

---

## Core Operations

### 1. Credit Notes & Invoicing Adjustments
* **Stand-Alone Credit Note**: Issues general credit balance available for future billing schedules.
* **Invoice-Linked Credit Note**: Cancels or reduces a specific open invoice balance and triggers adjusting journal entries to your General Ledger.

### 2. Customer Prepayments & Retainers
* Funds received prior to invoice generation are booked to **Customer Deposits Liability**.
* When billing schedules trigger, GAAPx automatically draws down the deposit liability to clear the generated invoice.

### 3. Refunds & Payment Reversals
* Executes 1-click refunds directly through connected Stripe or bank rails.
* Automatically reverses cash clearing entries in your ERP and restores original invoice status if required.