You are right. I have now had time to simulate your situation in a test business and review the relevant Guide: https://www.manager.io/guides/5494.
First, your customer did not have a credit balance on the start date. They had a 500.00 debit balance. (500.00 remaining in Accounts receivable.) But that is irrelevant for this discussion
Second, the Guide clearly states:
If an invoice has been partially paid, only its remaining balance due should be entered.
A sales invoice against which a credit note has been issued has been partially paid. From a technical standpoint, the credit note was not a financial transaction of the business under Manager. Therefore, it is ignored, and only the sales invoice’s reduced balance is used to set the start date.
I have also had time to review the history of changes affecting credit notes over the past couple years. My recollection about them being added to customer starting balances was flawed. What I was remembering was related to establishing average cost of an inventory item when a sales invoice was from before the start date, but a credit note was issued immediately after. See this topic for discussion and resolution of that issue: Credit Notes posting incorrectly when pre-start date sales invoices exist - #8 by Tut. This fix was implemented about 18 months ago. I apologize for combining these issues in my mind.
I will edit my earlier post in this thread to correct the record.