Regarding the Adjustments Type drop down menu on the Receive Payments screen, they all act as adjustments in the system. The three types listed allow you get a better idea of what type of adjustment took place:
- Adjustments-If you provide any sort of discount when a customer pays their invoice early you can create an adjustment for say 10% of the total invoice. You can also create an incentive if someone hasn't paid past 30 days to at least get you most of the invoice total in return. (After 30 days) "We will give you a 10% discount this one time if you pay us by a certain date".
- Bad Debt-If the customer cannot pay(bankruptcy, close of business, etc.) and you agree to eat their balance.
- Credit Memo-If you accidentally created an invoice or created for an incorrect balance. Instead of removing invoices, because they are tied to transactions, you issue a credit memo as if the customer doesn't owe you any money and their balance is correct.