Using Cancellation Posting for a Credit Memo

You can cancel a posted invoice one time. The entire amount of the original invoice is canceled; partial credit memos cannot be made.

Open the General Parameters form and make sure Enable Cancellation Posting is selected.
Open the Invoice, Debits and Credit Memos form and click the filter-in-place button.
Select Actions > New.
Specify this information:

Customer

Specify the customer for which an invoice must be canceled.

Type

Specify Credit Memo.

Cancellation

Select this check box.

Apply To Invoice

Specify the invoice to which to apply the cancellation. The list of posted invoices to which you can apply cancellation posting does not include those that are referenced by a posted credit memo, debit memo, or payment. Amounts from the original posted invoice are entered automatically and cannot be changed.
Complete the credit memo and save the record.