At first glance you might wonder what’s so tricky about recording a vendor refund in QuickBooks. Why is this question being asked? Or, this seems simple, am I doing it right?
Let’s back up and set up a scenario. You run a service based business that pays for some supplies. One week you pay a bill to your supplier for cleaning supplies. A few weeks ago you received the bill and entered the bill in QuickBooks correctly. Last week you properly went to Pay Bills. There you paid that bill and any others that needed to be paid. If you entered a bill and then wrote a check for the bill AND the bill still shows in your Accounts Payable, go to this QuickBooks blog where I explain how to correct that.
So now your bill is paid and business goes on. Then one day you receive a check back from that vendor for any number of reasons: an unknown discount, price change, or whatever. A common mistake is to receive those funds back against the expense from the original bill; you might even go as far as labeling the deposit as being received from that vendor. And I’m sure it goes without saying that of course you noted the refund reason in the deposit memo field. But this is still incorrect, slightly. This is wrong because it does not directly tie the deposit to the vendor. Meaning you will not find this deposit in the vendor center.
So, how do you properly receive a vendor refund? Go to the deposit screen, in the received from field enter the vendor name. Then in from account field, here you put accounts payable. Memo and amount as usual then save and close. Next you need to enter a bill credit from the bills screen. After opening bills toggle it to a credit and enter the vendor name, date, amount, and memo it. In the account field, this is where you will put the expense account that off-sets the original bill. Save and close. Last step, go to pay bills and find the vendor. What you will be clearing here is the check from vendor received. Check the box, and then in the lower portion of the screen you will find set credits. There you can apply the bill credit you created and click done. Click pay selected bills, then click done.
There you have it. You have correctly received a vendor refund check. Both the incorrect and correct way will have the same impact on the expense account. However, the correct procedure will show the transaction in vendor reports.