A bank deposit is created (+New, Bank Deposit) with all the checks amounts and deposited into the bank. The customer pays $500, which leads to a $100 credit. Following the same example, 4 invoices each of $100 have been issued.
I saw this thread and have a question as to the impacts of the credit in the Bank Register and finally Reconciliation. I'd like to make sure this is taken care of. Keep me posted on how it goes or if you need additional help. I'm also adding this article to see various information on how you can refund the customer or record the overpayment as a tip-in QBO: Handle a customer credit or overpayment in QuickBooks Online. You can click this article to see detailed steps on how you can apply the available credit to customers' balances or open invoices: Create and apply credit memos or delayed credits in QuickBooks Online. I've attached a screenshot below for visual reference: This way, it will automatically create a credit to the customer's profile that you can apply for future invoices. Meanwhile, you can enter the full amount of $500 in the receive payment window and choose the four invoices that cost $100 each. Since the customer pays you $500 and the invoices to be paid are only $400, there's no option to automatically issue a credit memo for $100 in QuickBooks Online. Once the customer overpays more than what was owed, you can enter a credit memo, refund the customer, or enter the overpayment as a tip in QuickBooks. I'll share details on how customer's credits or to handle overpayments in QuickBooks Online. Welcome back to the QuickBooks Community.