I owe my customer for several bills - $1200. My customer owes me for several invoices $1500. So he cuts me a cheque for $300. I'm confused about creating credit memos and how to apply the payments on each side. Please help.

1) I owe my customer for several bills - $1200.

You must identify these accurately.
They are all in DEBIT
Credit each one of them with the appropriate
Amount, thereby bringing their balance to ZERO.

2)My customer owes me for several invoices $1500.

You must identify these accurately.
They are all in CREDIT
Debit each one of them with the appropriate
Amount, thereby bringing their balance to ZERO.

At the end of the exercise you finish having a bunch of ZERO accounts and a credit of $300
In your bank account.