Overpayment shows as open to the customer even refund is issued

Hello there, @panda0210.

I'm here to share information with you about recording customer refunds.

To be able to zero out your customer's balance and Accounts Receivables, you'll need to create an expense transaction for the overpayment. Then, create a payment and select the expense recorded and the existing credits.

To do this, here's how:

1. In the left menu, click the + New button.
2. Select Check or Expense.
3. Choose the name of the customer.
4. Select the same bank account used in processing the refund.
5. In the Category Details section, choose Accounts Receivables in the Category column.
6. Enter the complete expense details.
7. Click Save and Close. 

After that, link the expense and the unapplied amount.

1. Open your customer's transaction list.
2. Click on the drop-down arrow under New transaction and choose Payment. 
3. On the Receive Payment window, select the check under the Outstanding Transactions section and the Unapplied Payment under the Credits.
4. Click Save and close.

For more information about this process, see this article: Record a customer refund or supplier refund in QuickBooks Online.

If there's anything else I can do for you, please let me know. I'll be around to help you.

Making sure to offset your refund is our top priority, panda0210.

Recording a refund is based on various scenarios and this won't affect your reconciliation. You'll just have to make sure that the affected account used is Accounts Receivable (A/R) associated with your customer transaction. To ensure that you have correctly recorded the transaction, follow the steps below: 

To enter the check:

1. Open your QBO account, then select Check from the New (+) icon.
2. Pick the customer's name under the Payee section.
3. Under Category select Accounts Receivable, then enter the overpaid amount.
4. Save the check.

Then, follow these steps to link the check and the unapplied amount.

1. Open your customer's transaction list.
2. Click on the drop-down arrow under New transaction and choose Payment. 
3. On the Receive Payment window, select the check under the Outstanding Transactions section and the Unapplied Payment under the Credits.
4. Hit Save and close.

Once done, open a Transaction Journal so you can check the accounts. 

1. Go to the Expenses tab on the right menu.
2. Locate and open for the check.
3. Click More on the lower part, select Transaction journal.

Moreover, QuickBooks automatically downloads the latest transaction. For more information on how to match the transactions, check out this article for your guide: Categorise And Match Online Bank Transactions In QuickBooks Online. 

Let me know if you have any other concerns about refunds and reconciliation. I'll be here to help.

Hi,

I did not apply yet any of the responses I received from you guys, but I am thankful for your help.

Before I will apply the solutions you gave me, I want to show you the screenshot of the transaction journal in which I register a refund and reconciled as the bank feeds.

Please let me know if which among the 2 solutions is applicable and which I missed that's why it is still appearing "credited to" if I enter new invoices to the same client.

Thanks for coming back and provided us a screenshot to better isolate the issue, panda0210.

If you created a refund receipt, we'll need to create an expense transaction that will be posted to Accounts Receivables. This zero out your customer's balance and Accounts Receivables. Then, create a payment and select the expense recorded and the existing credits. Here's how: 

1. In the left menu, click the + New button.
2. Select Expense.
3. Choose the name of the customer.
4. Select the same bank account used in processing the refund.
5. In the Category Details section, choose Accounts Receivables in the Category column.
6. Enter the complete expense details.
7. Press Save and Close. 

After that, link the expense and the unapplied amount.

1. Open your customer's transaction list.
2. Click on the drop-down arrow under New transaction and choose Payment. 
3. On the Receive Payment window, select the check under the Outstanding Transactions section and the Unapplied Payment under the Credits.
4. Press Save and close.

To learn more about this one, see the Record a customer refund or supplier refund in QuickBooks Online article. Feel free to visit our Expenses and vendors page for more insights about managing your vendor transactions.

You can always update us after performing the solutions or after contacting our support, as I want to ensure this is resolved for you. Please reply to this post and I'll get back to you. You have a good one.