Supplier refunds in PeopleSoft Accounts Payable

Note: This is not related to customer refunds in Accounts Receivable. Please do not post about customer refunds and mark the question as answered. This issue pertains to Accounts Payable, where the supplier is refunding the money after the check has cleared the bank.

Could you please share how organizations typically handle supplier refunds in PeopleSoft Accounts Payable?

In our case, a PO invoice was created for $1,000, but only a partial quantity was received. The supplier subsequently issued a refund of $500, via check. This supplier payment was recorded in Accounts Receivable; however, we are unclear on how to appropriately apply the $500 credit in Accounts Payable.