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Handle supplier refunds and credits in QuickBooks Online

SOLVED•by QuickBooks•89•Updated 3 weeks 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. Select a heading below that suits your situation and we will help you either:

Record a supplier refund

A supplier will usually offer you a refund, or a return of money, if you've overpaid for an invoice or they were unable to fulfil an order. The method to record this in QuickBooks differs slightly depending 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.

  1. First, make sure you have already created the initial expense or cheque in QuickBooks and assigned a Category/Account to it.
  2. Select + New.
  3. Select Bank Deposit.
  4. 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.
  5. 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.
  6. Select Save and close.

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.

  1. Select + New.
  2. Select Supplier credit.
  3. In the Supplier field, select the appropriate supplier.
  4. Enter the Payment date, Amount, GST​, ​and Category (This is the category, product, or service you’re getting a credit for).
  5. Select Save and close.
  6. Select + New and select Bank deposit.
  7. 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.
  8. Next, go to + New and select Cheque.
  9. Add the payee and choose the Supplier Credit and Deposit (from the drawer that appears on the right-hand side) and add them both.
  10. Balance should be 0 as they will cancel each other out.
  11. Select Save and close.
  12. If you have Online Banking, go to Bookkeeping, select Transactions. Then match the record found on the Bank transactions (Take me there) page.
  1. Select + New.
  2. Select Credit card credit.
  3. In the Payee field, select the appropriate supplier.
  4. From the Bank/Credit account ▼ dropdown, select the credit card where you received the refund to.
  5. Enter the Payment date, refund Amount, Tax and Category.
    Note: The category used here is the original expense account on the original bill.
  6. Select Save and close.

Record a supplier credit

A supplier can offer credits, or a means to reduce a future purchase amount, as an alternative to a refund, or simply as a way to say thank you! Here's how to record it, then apply it to a future payments, in QuickBooks Online.

  1. Select + New.
  2. Select Supplier credit.
  3. In the Supplier ▼ dropdown, select your supplier.
  4. 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.
  5. Select Save and close.

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.

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

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

  1. Select + New.
  2. Select Supplier credit.
  3. In the Supplier ▼ dropdown, select your supplier.
  4. 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.
  5. Select Save and close.
  1. Select + New.
  2. Select Bank deposit.
  3. In the Account dropdown menu, select the account where you got the refund.
  4. 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.
  5. Select Save and close.

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.

  1. Select + New.
  2. Select Pay bills.
  3. 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.
  4. Select Save and close.

We're here to help

If you need additional help or have questions, or you require assistance at any point in this process, our Customer Success team is happy to help.

Sign in to QuickBooks and start a discussion in our QuickBooks Community or join one of our Facebook Groups to connect with other like-minded QuickBooks customers. 

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