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ke108
Level 1

Customer refunds

How do you properly record a customer refund for an over payment that was recorded in the prior year?

 

Example:  Over payment is in December 2019 and is sitting in Unapplied Cash Payment Income.  Refund for over payment is processed in 2020.  Is there a way to clear "Unapplied Cash Payment Income" in both years?

 

Thank you

3 REPLIES 3
IamjuViel
QuickBooks Team

Customer refunds

Let me help you sort out the overpayment from your customer, @ke108.

 

You can either leave the overpayment as is and apply it the customer's future invoices, or create a refund for the overpayment.

 

Here's how to create a refund:

  1. Go to the New icon (+).
  2. Choose the Refund receipt or Give a refund
  3. Select the name of the Customer drop-down.
  4. From the Refund From drop-down, select the bank you deposited the payment for the invoice too.
  5. Add all products or services the customer returned in the Product or Service column.
  6. Enter the complete refund details.
  7. Click Save and close.

The other way is to create a cheque to record the refund and reduce the balance of the account where the overpayment was deposited. Also, it offsets your customer's overpayment. Here's how: 

  1. Go to the New (+) icon.
  2. Choose Cheque.
  3. In the Payee column, select the customer.
  4. Choose Accounts Receivable in the Category column.
  5. In the Amount column, enter the overpayment amount. 
  6. Click Save and close.

Once completed, you can pair the check with the credit or overpayment. Here's how:

  1. Go to the New (+) icon.
  2. Choose Receive Payment.
  3. Enter the necessary information. 
  4. Under Outstanding Transactions, choose the Cheque that you created.
  5. Select the Unapplied Payment under Credits
  6. Make sure Amount Received is zero.
  7. Click Save and close.

You can use this article for more detailed insights: Record a customer refund in QuickBooks Online.

 

Swing by here if you have other questions. I'm always here to help you with managing your unapplied cash payments.

ke108
Level 1

Customer refunds

Thank you!  I was wondering when I do the refund check in 2020 and apply it to the over payment that was in 2019 how that would affect the P & L?  When I link the two it still shows them in each year in "unapplied cash payment income".  I didn't know if something different should be done when 2 years were involved? 

Thank you so much!

Catherine_B
QuickBooks Team

Customer refunds

Hello there, ke108. 

 

The Unapplied Cash Payment Income is used to report cash basis income from customer payments that are received but not applied to any sales form. Here are a possible reasons why an amount is showing in this account:

  • A customer prepaid you and you recorded the payment before creating the sales form (invoice or sales receipt).
  • You entered payments without matching them to sales forms.
  • The date of the payment is before the invoice date it's applied to.

We can follow the steps shown in this article on how to clear Unapplied Cash Payment Income and how we report this account

 

If there's anything else that you need, you can always leave a reply. You take care always!

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