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Quickbooks Vendor Refund – Credit Card, Bank Account, Vendor Credit

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How you process a vendor refund in Quicbkooks is dependent on what you will do with the money. Will you:

  1. Refund it to a Credit Card Account?
  2. Refund it to a Bank Account?
  3. Use it as a Vendor Credit to be used on a present or future bill using Pay Bills?

1. Refund to a Credit Card

Refunding a credit card is easy. Instead of selecting the Purchase/Charge radio button, you select the Refund/Credit radio button.

  • Enter Credit Card Charge Refund/Credit: Go to Banking > Enter Credit Card Charges. Select the Refund/Credit radio button and enter the receipt that you have for the refund. This transaction should be a mirror-image of the original purchase, meaning that you select the same expense / asset accounts and have the same tax codes and amounts.

There is no such button in the Write Checks (banking > write checks) window when receiving a refund to your bank account in the form of a debit card, check, or EFT (electronic funds transfer).

2. Refund to a Bank Account – United States

To process a refund to your bank account in the United Sates, you only need to do 1 transaction, lucky you!

  • Record Deposit: Go to Banking > Record Deposits. For Receive From, choose the Vendor’s name. For From Account, choose the same expense / asset accounts as the original transaction. If you received more money than the original purchase, than add another line item with the Vendor’s name, choose Accounts Payable for the From Account, and put in the amount that was above the original purchase into this line.

2. Refund to a Bank Account – Canada and United Kingdom

To process a refund to your bank account in CANADA or the UK, you need to do 3 transactions. This is because you have the GST/HST or VAT taxes to account for, which can’t be done in the Record Deposits window:

  • Enter a credit: Go to Vendors > Enter Bills. Select the Credit radio button and enter the receipt that you have for the refund. This transaction should be a mirror-image of the original purchase, meaning that you select the same expense / asset accounts and have the same tax codes and amounts.

    This transaction creates a credit (paid) in your accounts payable account for the vendor you purchased from.
  • Record Deposit: Go to Banking > Record Deposits. For Receive From, choose the Vendor’s name. For From Account, choose Accounts Payable. For Amount, use the total amount that was refunded, you don’t worry about taxes since you already did that in the credit transaction.

    This debit transaction will cause a debit (billed) on the Account Payable account, which is the same as saying that it creates a bill for the Vendor.
  • Pay Bill: Go to Vendors > Pay Bills. Choose the correct bill that you entered in step 2 and select the Set Credits button. Choose the matching credit that you created in step 1. Your bill and credit amounts will match up and zero out. Click on Pay Select Bills (it doesn’t matter which account you choose in the Payment section, as the end payment is $0) and you are done.

    This Pay Bill transaction must be done as it matches up the bill and the credit that you created.

3. Refund to be used as Vendor Credit on a Present of Future Bill

If the refund will be used as a credit on a present or future bill, you can can enter this in 1 transaction:

  • Enter a credit: Go to Vendors > Enter Bills. Select the Credit radio button and enter the receipt that you have for the refund. This transaction should be a mirror-image of the original purchase, meaning that you select the same expense / asset accounts and have the same tax codes and amounts (if it is a free credit that a vendor is giving you, than you can use an income account).

    This transaction creates a credit (paid) in your accounts payable account for the vendor you purchased from. You can later use this credit when paying your bills.

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12 Comments


Sylvia
April 5, 2012, 7:25 am

Thank you for your help. It was simple and helpful.

    smallbizdoer
    April 5, 2012, 7:41 am

    Your welcome, glad I could help!

Ray
April 17, 2012, 3:44 pm

What if the credit is to a bank account (Visa debit card) for specific inventory items returned/damaged and not an expense/asset account? The transaction needs to remove the items from inventory.

smallbizdoer
April 17, 2012, 9:08 pm

You'd make sure to use the Items tab (as opposed to the expenses tab) and put in the Qty you are returning. I've taken a screen shot that you can see here http://www.smallbusinessdoer.com/wp-content/uploa…. Otherwise, you'd follow the instructions above for your specific situation and country.

Debbie
June 15, 2012, 10:26 am

I have done the credit, but I need it to deduct from my company credit card. How can I see it so I can "reconcile"?

My company credit card shows a credit from the vendor for -$67.12. I entered a credit for the vendor for $67.12, but can't for the life of me find out how to be able to "select" the credit and apply to my company credit card account. Thanks for any help. My bookkeeper comes Monday, so I need to fix today!

    smallbizdoer
    June 15, 2012, 3:05 pm

    Hi Debbie,

    Since it's a credit card, the easiest thing to do is to delete that credit you entered for the vendor and instead use the "enter credit card charges" window.

    This would be method 1 of my above instructions.

    It's as simple as going to the "enter credit card charges" window and clicking on the "Refund/Credit" radio button. Pick the correct expense account and save. That's it.

Tammy
July 31, 2012, 8:00 pm

Sometimes, however, there`s a more complicated situation.

Sometimes we have one vendor that combines multiple bills and credits that all add up to a credit that they refund onto our credit card. I did do a workaround for that once, but I forget how I did it! Any ideas?

    smallbizdoer
    August 2, 2012, 3:36 pm

    Hi Tammy,

    That's a tricky one! I'm actually on the road (read vacation) and I don't have QuickBooks Desktop with me. I went into QuickBooks Online and this is what worked. It's very similar to Method 2 listed above, the procedure used for "Refund to a Bank Account – Canada and United Kingdom".

    1. In "Enter Bills", enter all the bills and credits that the vendor has issued.
    2. In "General Journal" or "Journal Entry" (forget the exact terminology used), do the following: A) For the first line, choose your credit card account and in the debit column enter the amount you will be refunded in the end, after all the bills and credits will be used up. For the name, make sure to choose the name of your vendor. B) For the second line, choose your accounts payable account and in the the credit column enter that same dollar amount of the refund. Again, for the name make sure to choose the name of the vendor.
    3. Go to "Pay Bills", apply all the credits to the bills, and both your bills and credits should zero out.

    In case you're wondering, the general journal entry is creating a bill for you to pay (the debit accounts payable part of the transaction). It also puts money back onto your credit card (the refund or credit part of the transaction).

    That way, when you go to "Pay Bills", you have an extra bill which is the exact amount of the refund.

    I hope this makes sense. If it doesn't, please don't hesitate to write back and let me know. Likewise, It would be appreciated if you can let me know how it works out for you.

Tammy
July 31, 2012, 8:01 pm

Forgot to subscribe to comments so I can find out the answer! :)

Michael
August 31, 2012, 11:23 am

What about a refund for ATM fees from the bank? Which account would I record this in? Thanks

    smallbizdoer
    September 2, 2012, 8:41 am

    Hi Michael, a refund from the bank should be easy to do. For ATM fees, I'm going to assume you used an account named something like "bank service charges" to account for the fees when they were charged. If so, to account for a refund, go to "Record Deposits" and for the RECEIVE FROM choose the name of your bank and for the FROM ACCOUNT use the "bank service charges" account. Does that make sense?

Skateconsultant
June 25, 2013, 2:07 pm

Thank you very much that was very helpful and it solved the problem i had. It was clear and concise. Solved the problem.