How do you enter a vendor credit and determine correct GL account to use when setting up?

Hello there, Dav.

Thank you for outlining your approach to setting up your vendor credits. I'd like to offer additional insights to simplify the process of selecting the appropriate General Ledger (GL) account when recording a vendor credit in QuickBooks Desktop (QBDT).

To shed light on, when you enter a bill and apply for vendor credit, it really depends on whether you're going to record an item with vendor credit or not. If you're trying to enter a bill or vendor credit that involves a particular expense that doesn't include an item (credit for labor expense, consulting, professional expenses, etc.), you can use the Expense tab.

On the other hand, you can use the Item tab when you're recording a credit that includes an inventory item, non-inventory, or service item). 

Thus, it is not necessary that both tabs are filled in since it will really depend on the nature of the expense that you're trying to apply for vendor credit.

Additionally, you can always refer to your previous post that my colleague GenmarieM has addressed with regard to the steps on how to find which GL should be used for Purchase Order (PO) transactions: How do I see which GL account is mapped to a Purchase Order?

Moreover, feel free to view this article to have further details on choosing the appropriate scenario, along with the steps how to record a vendor refund in QBDT: Record a vendor refund in QuickBooks Desktop

Furthermore, you can also read this article to learn how to generate vendor reports based on your business needs in QBDT: Customize vendor reports

Should you have any further questions with regard to managing your vendor expenses and credits in QBDT, feel free to revisit this thread. We're here to help you along the way. 

@Dav 

POs are non-posting transactions so they don't hit any GL account.  It's the bill you create when converting the PO to a bill that hits a GL account based on how the bill is entered.  On the Items tab, inventory items hit your Inventory Asset account - non-inventory and service items hit the expense account listed in the respective item's set up.  On the Expenses tab, the GL account listed is the account that gets hit and can be used on the vendor credit to reduce that expense.  Ultimately, the proper GL account to use for a vendor credit depends on the reason for the credit and whether or not you returned items to the vendor.