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Trevor1511
Level 3

How to change a refund from being classified as income.

I had an expense where I purchased an item.  The supplier was out of stock so he gave me a refund.  When the refund appeared on my bank statement Quickbook classified that as Uncategorised income.  Hence when I went to print out my profit and loss statement it appeared as an income.  How do I correct this?

 

Do I change the account from uncategorised income to the expense account?

7 Comments
Rea_M
QuickBooks Team

How to change a refund from being classified as income.

It isn't necessary to change the refund account from uncategorised income to expense, @Trevor1511. I'm here to share further details about this.

 

QuickBooks Online (QBO) automatically assigns the unidentified amounts received when downloading transactions. Then put them to the Uncategorized Income account. Since it's a refund from your supplier due to an out of stock item, it should be considered as an income.

 

Based on your description of the scenario above, it seems that you've already added the refund transaction to QuickBooks. You can still assign it to the appropriate income account by updating its category. Let me guide you how.

  1. Go to the Reports menu, then pull up the Profit and Loss report again.
  2. Select the Uncategorised Income amount to open its Transaction Report.
  3. Locate and then select the refund transaction to view its details.
  4. In the Category/Account field, choose the appropriate income account.
  5. Enter notes in the Memo field for easy tracking.
  6. Click Add.

 

Categorising your transactions will ensure that they match your real-life bank statements. With this, it's important to reconcile them every month. This way, you can monitor the growth of your business and make sure they're accurate. For the detailed steps, you can refer to this article: Reconcile an account in QuickBooks Online.

 

Please let me know if you have other concerns. I'm just around to help.

Trevor1511
Level 3

How to change a refund from being classified as income.

@Rea_M 

 

Thank you for your reply.

 

I am a little confused.  Income in a profit and loss statement usually refers to sales of product or sale, not expenses that relate to general expense I believe.

 

  • Ok, I am a photographer.
  • I ordered and paid for speedlites from MK Studio (Suppliers)
  • They could not fill the order so they refunded the money I paid them.
  • When the refund came up through the bank account it was classified at Uncategorised Income.
  • I believe I should have entered it against the mkstudio expense transaction it related to.
  • As I did not change the account it shows up as an income generated in the Profit and Loss account as a sales income

Do I use the procedures listed to correct it, or is there another way to correct it.   It was not a sales income, it was a refund on payment the business paid the supplier.

 

It has been 15 years since I have had to think about this sort of thing.   Unfortunately due to Covid-19 restriction, I have not been able to generate any sales/income.

Kass_B - Product Champion
Content Creator

How to change a refund from being classified as income.

Hi Trevor1511,

 

You can use the instructions provided above to change the category/account from Uncategorised Income to the category of your choice. However, if you are handling a supplier refund we have specific steps to record this in QuickBooks Online. The process looks a little tricky but will correct it. You will need to go to the Reviewed section of your Banking tab, and locate and undo the categorised refund. Then follow these steps:

 

Firstly, you need to create a Supplier Credit:

  1. Select + New, then Supplier credit.
  2. In the Supplier dropdown, select your supplier.
  3. Depending on how you recorded this purchase with this supplier, enter the Category or Item details, date, amount and so on.
  4. Select Save and close.

 

Secondly, you need to create a Bank Deposit (this will link to the amount received in your bank feed):

 

  1. Select + New, then Bank Deposit.
  2. In the Account field at the top left, select the bank account you received the refund to.
  3. In the Add funds to this deposit section, fill in the following fields:
    • Received from: Select or enter the supplier name.
    • Account: Select the Accounts Payable account.
    • Amount: Enter the amount.
  4. Select Save and close.
  5. Go to your Banking tab. Click on the transaction to expand it. If it has already located the deposit, select Match. If not, select Find Match, tick the deposit then Save.

 

Finally, you need to create an Expense which will link the two together:

 

  1. Select + New, then Expense.
  2. In the Payee drop-down, select the supplier name.
  3. Leave the Category, Description, Amount and GST fields blank.
  4. On the right, you will see an Add to Expense column. Select the Deposit and the Supplier Credit (see below screenshot).
  5. Select Save and close.

expense.PNG

 

When you add both these transactions to the expense they will balance each other out - so no open transactions will show up in reports and so on, and any open or overdue amounts are cleared. 

 

-Kass

JTV
Level 1

How to change a refund from being classified as income.

Trever, were you able to figure this out?  Seems complicated for a simple supplier refund. 

hello86
Level 1

How to change a refund from being classified as income.

Seems like all of this would just be easier to exclude both the purchase and the refund from the ledger.  your bank statement will be missing the charge and chargeback but your accounts will balance.

Rhiankelley
Level 1

How to change a refund from being classified as income.

I’m having the same issue and reading through all of these comments sounds like excluding them is the best way. Please someone from support correct us if we are wrong! 

Rea_M
QuickBooks Team

How to change a refund from being classified as income.

I'm here to share details about handling refund transactions in QuickBooks Online (QBO), @Rhiankelley.

 

When a refund is posted in your bank, it shouldn't be excluded. It needs to be categorised or matched appropriately to keep your financial data accurate. To learn more about this, you can check out this article: Categorise and match online bank transactions in QuickBooks Online.

 

Also, I encourage you to reconcile your accounts every month. This way, you can effectively manage your income, expenses, and detect any possible errors accordingly. For the step-by-step guide, you can refer to this article: Learn the reconcile workflow in QuickBooks.

 

Additionally, here's an article that'll further guide you in managing your business growth using QBO: QuickBooks Help Articles. It includes topics about data security, banking and transactions, and managing expenses, to name a few.

 

Please don't hesitate to drop your comment below if there's anything else that I can help you with. I'll be glad to help. Take care and have a great weekend.