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Handle supplier refunds and credits in QuickBooks Online

by Intuit•28• Updated 2 months ago

Just got some money back from a supplier? How you should handle it in QuickBooks Online depends on whether it was a refund or a credit.

Record a supplier refund

A supplier may give you a refund if you paid too much for an invoice. Or, they may give you a refund if they can't fill your order. How you record this in QuickBooks depends on how you entered the purchase.

If you’re not sure which method to use, your accountant will be the perfect person to advise you. We can also help you find a ProAdvisor if you don't have one.

Supplier refund if you originally paid with cash or a cheque

First, make sure you have already created the initial expense or cheque in QuickBooks and assigned a Category/Account to it.
Select + New.
Select Bank Deposit.
Go to the Add funds to this deposit section:
- Enter the amount refunded by the supplier and choose the Category/Account that you selected on the initial expense or cheque.
- If this refund was for an expense that you linked to a customer or project, tick the Track returns for customer box, then select the customer or project. That way, your costs will not be overstated.
If you deposited customer payments for invoices into the bank account along with the supplier refund, add them in the Select the payments included in this deposit section.
Select Save and close.

Supplier refund if you originally paid with a debit card

Before you start

If the supplier has been overpaid – you don't need the supplier credit as you will already have an unapplied credit that acts as your supplier credit - begin your process at step 5.

Select + New.
Select Supplier credit.
In the Supplier field, select the appropriate supplier.
Enter the Payment date, Amount, GST, and Category (This is the category, product, or service you’re getting a credit for).
Select Save and close.
Select + New and select Bank deposit.
In the Add funds to this deposit section, enter the following information:
- In the Received From field, select or enter the desired supplier.
- In the Account field, select the Creditors account (Accounts payable).
- In the Amount field, enter the amount of the refund.
- In the GST field, select the appropriate GST (not inclusive/exclusive of tax).
- Select Save and close.
Next, go to + New and select Cheque.
Add the payee and choose the Supplier Credit and Deposit (from the drawer that appears on the right-hand side) and add them both.
Balance should be 0 as they will cancel each other out.
Select Save and close.
If you have Online Banking, go to Bookkeeping, select Transactions. Then match the record found on the Bank transactions (Take me there) page.

Supplier refund if you originally paid with a credit card

Select + New.
Select Credit card credit.
In the Payee field, select the appropriate supplier.
From the Bank/Credit account ▼ dropdown, select the credit card where you received the refund to.
Enter the Payment date, refund Amount, Tax and Category.
Note: The category used here is the original expense account on the original bill.
Select Save and close.

Record a supplier credit

Suppliers can give credits to reduce the cost of future purchases or as a way to thank customers.

Supplier credit on a bill you plan on paying later

Step 1: Create a supplier credit

Select + New.
Select Supplier credit.
In the Supplier ▼ dropdown, select your supplier.
Depending on how you record purchases with this supplier, enter the Category details or Item details. Usually, this is the category, product, or service you’re getting a credit for.
Note: If you choose an inventory item, QuickBooks will put it back into inventory. If the item is defective or if you don’t want it added back to inventory, you can make an inventory adjustment.
Select Save and close.

Step 2: Apply the credits to an upcoming bill

You can apply a supplier credit toward any open or future bill. When you’re ready to use the credit, here’s how to do it.

Select + New.
Select Pay bills or Pay bill.
Select a bill for your supplier from the list. You'll see the available credit with this supplier in the Credit Applied field.
Complete the rest of the fields like you normally do.
Select Save and close.

Supplier credit when no expense has occurred

Step 1: Create a supplier credit

This makes sure the credit hits the expense account you use for this supplier.

Select + New.
Select Supplier credit.
In the Supplier ▼ dropdown, select your supplier.
Depending on how you record purchases with this supplier, enter the Category details or Item details. Usually, this is the category, product, or service you’re getting a credit for.
Select Save and close.

Step 2: Deposit the money you got from the supplier

Select + New.
Select Bank deposit.
In the Account dropdown menu, select the account where you got the refund.
In the Add funds to this deposit section, fill out the following fields:
- Received from: Select the supplier who gave you a refund.
- Account: Select Accounts Payable. Important: You need to pick Accounts Payable so you can tie the refund to the supplier credit. This may seem a little strange, but it’s the best way to do this.
- Payment method: Enter the method your supplier used to refund you.
- Amount: Enter the amount of your refund.
Select Save and close.

Step 3: Use Pay Bills to connect the bank deposit to the supplier credit

Even though you aren’t paying a bill, this is the right thing to do. This last step is to keep your supplier expenses accurate.

Select + New.
Select Pay bills.
Select the bank deposit you just created. You’ll see the amount of the supplier credit in the Credit Applied field. The Total payment should be A$0.00.
Select Save and close.

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