You need to issue a customer refund as a credit. This can happen for several reasons but lets use the example of a customer paid to much for an item.
To issue a Customer credit you would follow the same steps as a customer return with one exception. The only line item on the return is the REFUND item that you will need to create.
1. Create a new item called REFUND. This item will be an other charge item.
2. Create a new Customer Return. Add REFUND as your line item and enter the price of the item the same as the refund.
3. When you approve this Customer Return Order Time will create a credit memo in your accounting system.
For more information on a customer return see: Customer Returns