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.