The tricky part arise when you have paid the Spplier Invoice, either by a Customer Payment or a Bank Payment, and later receive a Credit Note and a supplier refund (Bank Deposit).
I will try to explain everything in detail.
1. You receive a Supplier Invoice.
2. You most certainly pay the Supplier Invoice by a Customer Payment. Here you will select the invoice that should be allocated.
3 After a while you claim the Supplier Invoice (you want your money back). This results in a Supplier Credit Note.
4. This Credit note cannot be used to allocate the Supplier Invoice. This invoice has already been allocated. So the Credit note simple stays here until you receive the refund from your Supplier (a Bank Deposit).
5. Now the Credit Note is used for allocating the Bank Deposit.
6. You can only use Supplier Payments, Bank Payments of Credit Notes for allocation of Supplier Invoices (and also Bank Deposits).
7. When no payments are involved things are much easier. Then the Credit Note is being used to allocate the Invoice. And this is done automatically when using the supplier transactions window.
/Joe
