Which statement is correct regarding the application of a vendor credit?

The application of a vendor credit is accurately associated with an existing unpaid bill. When a company receives a vendor credit, it typically indicates that there has been an overpayment, a return of goods, or an adjustment made by the vendor. This credit can be directly applied to an outstanding bill, reducing the amount that needs to be paid.

By applying the credit to an existing unpaid bill, the business effectively reduces its liabilities and streamlines its accounts payable process. This is important for maintaining accurate financial records and ensuring that cash flow is managed efficiently.

In contrast, the other options pertain to different scenarios where a vendor credit could be less applicable. A paid bill would not be related to a vendor credit, as the credit cannot be applied to amounts that have already been settled. Future invoices or bills also do not align with how vendor credits are generally managed, since they must be applied to current liabilities rather than anticipated expenses. Thus, applying it to an existing unpaid bill is the correct operating procedure for utilizing a vendor credit effectively.