Customer Credit Memo to Income

[mbnzc300]

I have a customer that I invoiced for several sales taxable items on a single invoice.

One of the items was out of stock, so I want to refund the customer for that item and adjust the sales tax accordingly.

I created a credit memo for the item and marked it as taxable, and now my A/R shows a negative balance for the item + sales tax, and the sales tax liability account has been reduced accordingly. So all is correct on my books.

My question first is how do I cut the refund check to the customer? Do I need to make a journal entry? DR A/R, CR Cash?

My second question is we have some credits sitting in A/R on the books that are small over payments (<$1) that will not be refunded (they are very old). How can I clear these out? Do I just make a journal entry DR A/R, CR Income?

Thanks!

[SkinnyRaven · Accepted solution]

My question first is how do I cut the refund check to the customer? Do I need to make a journal entry? DR A/R, CR Cash? 

To write a refund check:

When you need to refund a customer some money, create a credit memo first. Then you can write a refund check.

• 1  Open the credit memo you want to use for the refund.

• 2  Click Refund at the top of the window.

  


• 3  Make sure all the information on the check is correct. Caution: Leave Accounts Receivable as the account in the detail area of the refund check. This ensures that QuickBooks will account for the credit and refund correctly.

• 4  Click OK.

QuickBooks for Mac 2013 User’s Guide 134

Although you have recorded both the credit memo and the check, you still need to connect the check to the credit memo so that QuickBooks can track the transaction correctly. You use the Receive Payments window to connect the two.

To connect the refund check to the credit memo:

1  Choose Customers > Receive Payments.

2  Choose the customer to whom you just wrote the refund check. You'll see the amount of the credit included in the Existing Credits field and the refund check in the bottom section of the window.

3  Select the Apply Existing Credits checkbox.

4  On the Refund Chk line, enter the check amount in the Payment column, if not already entered by QuickBooks, and then click OK. If you now choose Customers > Create Credit Memos/Refunds to display the credit memo you just entered and click Tx History, you should see the refund check listed in the Transaction History - Credit memo window. 

My second question is we have some credits sitting in A/R on the books that are small over payments (<$1) that will not be refunded (they are very old). How can I clear these out? Do I just make a journal entry DR A/R, CR Income?

For this I would use an other charge item on an invoice for the over payment amount, receive payments and apply credits.