We paid a vendor invoice twice and they sent a refund. How do we record this correctly?

Hi there, @PMB4. It’s great that your vendor was proactive about the refund. We just need to get your books back in sync.

The most efficient way to record the overpayment and the net refund in QuickBooks Desktop is by using the Accounts Payable account to bridge the two transactions. This ensures your bank reconciles perfectly while keeping your vendor history clean.

Here’s how to record the overpayment:

1. Go to the Vendors menu and select Pay Bills.
2. Select the vendor and enter the $1,445 payment. Since the original bill is already paid, this will create an unapplied payment.
3. When prompted, select Leave as a credit. This creates a balance for the vendor to pay back.

After that, you’ll need to deposit the refund and bank fee. Here’s how:

1. Go to the Banking menu and select Make Deposits.
2. In the Deposit To field, ensure your bank account is selected.
3. On the first line of the deposit:
   • Received From: Select your Vendor.
   • From Account: Select Accounts Payable.
   • Amount: Enter 1,445.00.
4. On the second line:
   • From Account: Select your Bank Service Charges expense account.
   • Amount: Enter -10.00.
5. Check that the Deposit Total at the bottom right shows $1,435.00, matching your bank statement.
6. Click Save & Close.

Once done, we can now clear the Vendor balance. Follow these steps:

1. Navigate to the Vendors menu and select Pay Bills.
2. Locate and check the Deposit transaction you just created for $1,445.00.
3. Click the Set Credits button.                    
4. Under the Credits tab, select the $1,445.00 overpayment credit from Step 1.
5. Click Done, then click Pay Selected Bills.                 

This creates a $0.00 transaction that links the overpayment to the refund, clearing the vendor’s account balance.

If you have further questions or need assistance, feel free to reach out.

Thank you Rusimyhr for your quick reply.  I found the solution you proposed worked for me nicely, except for the first step.  In order to record the overpayment I could not use the Pay Bills method because the original bill had been paid, so it did not appear in the Pay Bills list. 

However, I was able to write a cheque to create the unapplied payment using these steps.

• Go to Banking > Write Cheques.
• Select the Vendor and enter the Date (Dec. 29) and the full amount ($1,445).
• In the Expenses tab below, select Accounts Payable in the Account column.
• In the Customer:Job column, you must select the vendor's name again to link the payment to their A/P balance.
• Save & Close. This creates a $1,445 credit sitting on the vendor's account. 

After this, I followed your instructions carefully and was able to record the vendor refund deposit and bank fee, then clear the Vendor balance, and finally link the overpayment to the refund, clearing the vendor’s account balance.

Thanks again, I really appreciate your help.

You're very welcome, PMB4.

Thank you for your detailed response and for sharing the workaround you discovered. I'm glad to hear that my colleague's solution was helpful and that you were able to adapt it effectively to resolve the issue. Your detailed explanation could help other users who may be facing a similar situation.

If you have any further questions, please feel free to reply below.