A client called me today to ask how to post a refund on their City utility account resulting from an overpayment of a prior water bill. If there is no ‘existing credit’ open in QuickBooks to which to apply the Vendor's refund check, then here are the steps you want to take:
Step 1 - Record a Deposit for the Vendor’s Refund:
- In the menu bar, click Banking.
- Select Make Deposits.
- If the Payments to Deposit window appears, click OK to go to proceed directly to the Make Deposits window.
- In the Received from field: enter the vendor who sent you the refund.
- In the From Account field: select Accounts Payable.
- In the Amount field: record the amount of the vendor's check.
- Enter the remaining information on the Deposit.
- Click Save & Close.
Step 2 - Record a Vendor Credit for the amount of the Vendor’s Refund you received:
- In the menu bar, click Vendors.
- Select Enter Bills.
- Change the radio button from Bill to Credit.
- Enter the Vendor name.
- Click the Expense Tab.
- Enter an appropriate Account (such as Refunds, COGS, Other Income, etc., as appropriate for the nature of the refund.) In our case we used "Utilities:Water" because it was related to my client's water bill.
- Enter the Amount of the Vendor Check.
- Click Save and Close.
Step 3 - Link the Deposit to the Vendor Credit:
- In the menu bar, click Vendors.
- Select Pay Bills.
- Click next to the Deposit that matches in the Pay Bills window.
- Click Set Credits to apply the Vendor Credit you created.
- If more than 1 credit exists, select the Credit from the Credits window.
- Click Done.
- Click Pay Selected Bills.
- Click Done
ABC, step 1, 2, 3 the 'what to do' with the refund is resolved. By the way, if there was an 'existing Vendor credit' for the amount of the refund check, you would simply omit step 2 above, and then use step 3 to apply the the deposit to the 'existing' Vendor credit.