Where to classify customer account with credit balance of $3 we treat this as a current liability or do we need to deduct it from account receivable

There was nothing wrong with it being a liability -- that was where it belonged. I said I didn't think you should call it "customers with credit balance" as an account name. It was already where it belonged in the original problem. They have overpaid and you owe them - that's a liability. (Technically anyway. I could see a small company leaving that as negative receivables if it's immaterial, but for class, do it right.)

If you are doing both "sales" and "purchases" transactions with that "customer" you should categorize it under current liabilities/accounts payable.
If it is due to overpayment by customer it makes sense if you deduct the balance from total receivable when presenting. Once you sell goods/services to that customer in the future the balance will then turn a debit again.

Another homework problem... which you obviously didn't see the original of... For homework they are generally going to teach this the proper way as a liability, even though in real life we can usually let the credit balance ride. There will be no real selling in the future cause it's homework and the company isn't even real.

I think it should simply be refund to the customer if it is because of future order then it should be treated as liability as
Cash debit
Unearned income credit

But in first case:

a/c receivable debit
Cash credit

Materiality?