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Ataraxis_85
Level 1

Contra Accounts

Can I make a deposit into an expense account for refunds, or should I set up a contra account for those?

 

Specifically, I have a refund from our third party payroll vendor that is for tax reconciliation. I can either tag this to the payroll tax expense account, or create some sort of contra-income account. Which route do I take, or is there a better way to record this?

 

Thanks! 

2 Comments 2
MariaSoledadG
QuickBooks Team

Contra Accounts

Let me guide you on how you can record a refund from a vendor, Ataraxis_85.

 

There are different kinds of scenarios for vendor refunds. If the vendor sends you a refund check for a bill that is already paid, you can record a deposit of the vendor check. To do this, follow the steps below:

  1. Go to the Banking menu, then select Make Deposits.
  2. If the Payments to Deposit window appears, select OK.
  3. In the Make Deposits window, select the Received from the drop-down and choose the vendor who sent you the refund.
  4. In the From Account drop-down, select the appropriate Accounts Payable account.
  5. In the Amount column, enter the actual amount of the Vendor check.
  6. (Optional) Enter a memo, check number, payment method, and class.
  7. Select Save & Close.

 

Then, record a bill credit for the refunded amount. Here's how:

  1. From the Vendors menu, select Enter Bills.
  2. Select the Credit radio button to account for the return of goods.
  3. Enter the Vendor's name.
  4. Select the Expenses tab and enter the Accounts on the original bill.
  5. In the Amount column, enter the appropriate amount for each Account (the amounts may have to be prorated).
  6. Select Save and Close.

 

Next, link the deposit to the bill credit. 

  1. From the Vendors menu, select Pay Bills.
  2. Check the Deposit that matches the Vendor check amount.
  3. Select Set Credits and apply the Bill Credit you created earlier then select Done.
  4. Select Pay Selected Bills, then select Done.

 

If the vendor sends you a refund check for inventory items, you'll have to record a deposit and record a bill for the returned items. I've added this article for more information: Record A Vendor Refund In QuickBooks Desktop.

 

Moreover, QuickBooks Desktop has different bank feed modes available where each mode displays and handles transactions differently. Learn from this article for your reference: Add And Match Bank Feeds Transactions In QuickBooks Desktop.

 

Fill me in if you have any questions about refunds. I'll always be right here to help.

Rainflurry
Level 11

Contra Accounts

@Ataraxis_85 

 

Yes, you can make a deposit into an expense account.  It will reduce (credit) the expense and show up as a negative expense in reports. It is not a contra income account because that would be a debit whereas a reduction of an expense is a credit.   

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