Before transferring credits, you'll need to create a new (Asset) credit note clearing account.

This will be created like any other account, but note the following from the example below:

• The Account Type is set to Bank.
• The Account Name is Credit Note Clearing.

From the Sales command centre, open the Sales Register and navigate to the Returns and credits tab. From the list of invoices, click to highlight the credit note you want to transfer.

Click Pay Refund, and the Settle Returns & Credits window will open. In the Account field, select the Credit Note Clearing account you created earlier.

Double-check the payment details are correct and click Record.

The refund to Customer A posted a withdrawal to the Credit Note Clearing account. Creating a sales invoice to Customer B will transfer the credit and balance the clearing account.

Enter a sales invoice (Sales > Enter Sales) and select Customer B's card. Fill out the invoice details, keeping in mind the following:

• In the Acct# field, enter the Credit Clearing Account. You can disregard a warning that may appear about the type of account you've selected.
• Enter the Amount as a negative.
• Select the relevant Tax Code. In the example below, we've used the N-T Tax Code, but please check with your accountant as to how this affects your GST reporting, or that of your customer's.

Double-check the refund payment details then click Record.

With the transaction recorded, the following has happened:

• The deposit to the Credit Note Clearing account has offset the withdrawal from Step 1. The account should not have a zero balance.
• The credit note has been successfully transferred to Customer B.