Apply overpaid amount to new invoice for same customer

How do I apply a credit (overpaid amount) from one invoice to the new one?

You can use Journal entries tab. Let’s say you want to take $50 from Invoice #1 and apply it to Invoice #2

The journal entry would be:

|             Account              | Debit | Credit |
| Accounts receivable - Invoice #1 | 50.00 |        |
| Accounts receivable - Invoice #2 |       |  50.00 |

This can be applied for Purchase Invoices too, right? Sometimes we do overpay billed amount to get some cents credited when paying utility bills. Is using journal entries for these little amounts the best way?

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Yes, it would work for purchase invoices too but I don’t recommend journal entry approach anymore.

You should just edit the original payment and reduce the amount you’ve assigned to purchase invoice and the overpayment should be posted to Supplier advance payments account. The total amount of the payment will remain the same, it’s just that you will split the amount between two lines.