Categorize overpayment

Hello, Stevie31.

I know how to record the reimbursement check you receive from an overpayment made to a vendor.

Recording a refund from your vendor depends on how you record the purchase. I'll show you the step-by-step process.

Step 1: Enter a vendor credit.

1. Select + New.
2. Click Vendor credit or Receive vendor credit.
3. In the Vendor dropdown, locate your vendor.
4. Depending on how you record purchases with this vendor, choose either the Category details or Item details. Usually, this is the category, product, or service you’re getting credit for.
5. Once done, hit Save and close.

Step 2: Deposit the check you receive from the vendor.

1. Go to the + New Icon.
2. Select Bank Deposit.
3. In the Account dropdown, choose the account where you got the refund.
4. In the Add funds to this deposit section, fill out the following fields.
   • Received from: Locate the vendor who gave you a refund.
   • Account: Select Accounts Payable. Important: You need to pick Accounts Payable so you can tie the refund to the vendor credit. This may seem a little strange, but it’s the best way to do this.
   • Payment method: Enter the method your vendor used to refund you.
   • Amount: Enter the amount of your refund.
5. Hit Save and close.

Finally, you can use the Pay Bills to link the bank deposit to the vendor credit.

Here's how:

1. Go to the + New.
2. Click Pay bills.
3. Select the bank deposit you just created. You’ll see the amount of the vendor credit in the Credit Applied field. The Total payment should be $0.00.
4. Hit Save and close.

For your reference, here is a complete breakdown of the refunding process for a vendor: Enter a refund from a vendor.

I've also included this link for future reference if you need to refund a customer purchase using a credit card: Refund a credit card payment.

If you need anything else, let me know. I'll be around to help you.

@Stevie31 

An easier approach is to create an asset (other current asset) account called "Due from Vendor ABC".  Then, create a credit card charge for the charge made in error and assign it to the newly-created "Due from Vendor ABC" other current asset account.  Then, when you receive the check, create a deposit and assign the deposit to the same "Due from Vendor ABC" account.  The amounts will offset and you're good to go.