To manually allocate Receipts and Payments to Invoices select Yes to ‘Receipts/Payments Manual Allocation?’ in Setup / Options.
When Allocations is On each receipt from a Customer or payment to a Supplier is allocated to one or more Invoices or Journals. An alternative name for this method is Open Item, so called because individual invoices remain open to view on the ledger account until it is fully paid.
It is a more detailed way of keeping track of Supplier’s and Customer’s accounts.