Hello, Nagakambing.

I would like to shed some light on how the program handles customer credit.

There is no need to another create a credit memo, as you already have an overpayment on your account. Issuing an additional one would result in a duplicate credit balance.

In QuickBooks Desktop, please know that the system does not automatically allocate credits to outstanding invoices. Thus, you'll have to apply them manually by following the steps provided by my colleague, ReyJohn_D. You can also refer to the Option 3 section of this article: Give your customer a credit or refund in QuickBooks Desktop for Windows.

For your additional reference about managing receivables and sales transactions, you can check this guide: Get started with customer transaction workflows in QuickBooks Desktop.

We appreciate your membership in our QuickBooks community. If you have any further questions about the credit memo or need assistance, please don’t hesitate to reach out or leave a comment. I am here to help. Wishing you a wonderful day!