When a customer returns an item, instead of giving them money back you can instead give store credit, which can be used in your store at any time.
Process the return as normal, and when prompted to process payment, type (or hit INSERT key) the negative balance of the return into the Store Credit field.
After completing the transaction, the customer’s store credit balance can be viewed from the customer information screen.
During future transactions, store credit can be used in the same way as any other payment type from the complete transaction screen.