Vendor credits are credits that you receive from your vendor, and is treated as an equivalent of physical cash that the vendor owes you. This helps you track the money you’re owed until it is either paid by said vendor at a later date i.e refunded, or subtracted from any future bill amount due to that vendor.
You make an advance payment to your vendor, and the final bill amount comes out lesser than the amount you paid. The vendor keeps the rest of the money and issues equivalent credits in your name. You can track this in Zoho Books simply by recording this amount as a vendor credit. When you apply it to the next bill in the vendor’s name, the bill amount is reduced accordingly.
Your vendor just sent you the ten boxes of phones you ordered, but two of those boxes contain damaged phones. You inform him of this and he issues a credit note towards the value of those two boxes. He will apply this to the next invoice he sends you, but how do you track this internally to make sure he does? By recording the sum you’re owed as equaivalent vendor credits.
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