On the customer screen, click the Invoices tab
Find the invoice to credit
Double click on the invoice which then opens in a new tab
Make sure that 'Do not allocate payments to this invoice' is not ticked
Click 'Create Invoice Credit'
Click 'Yes'
Credit some or all of the lines by altering the quantities
Click 'Ok'
Click 'Yes' to generate a Credit Note
Click 'Next' through the screens and click 'Finish' on the last one.
Go to the Account for this Customer and then 'Payments' on the right hand menu
The credit you have created should appear on the list, and it should be show as allocated to the invoice you chose.