Matching bank withdrawal of different amount to refund receipt

francisconeto · ‎October 15, 2018

Here is my scenario:

I've issued a $10 Invoice. Costumer paid $10, merchant processor charged $0.69 processing fee and deposited $9.31 net into my bank account. I had to issue a full refund of $10 to costumer. Merchant processor withdrew $9.61 from my bank account as they partially refund the processing fee ($0.30) when I refund a payment. Costumer received his full $10 back.

I've created a Refund Receipt of $10. When I try to match the $9.61 bank withdrawal, the $10 refund receipt doesn't show up.

Other refunds that I create that are of the same amount of the bank withdraw show up with no problems when I try to match them to the bank transaction.

How can I match that refund?

sergeykryukov · ‎October 15, 2018

There are something I don't like in Lynda's approach.

Here is the thing:

I would like to keep my sales and expenses to do that sale separate. So I would prefer to have a record of $10 sale and $0.69 processing fee (stored in the special Expense or Cost of Gods sold account).

If you edit you Refund Receipt to have a value of $9.31 you decrease your sale to $9.31 and the total will be positive sale of $0.69 (balanced by the expense of $0.69).

For me this distorts later analysis of your sale.

(comment: After submitting my answer I have realised, that Lynda's point is to add Non-inventory item for which sales goes to the Expense account, instead of Income account, but this looks odd to me).

I would prefer to have a pure Refund Receipt of $10 matched to the Sales Receipt of $10 and Expense of $0.69 balanced to the Deposit to that account of $0.69 as a processing fee refund.

So, what you can do:

- Create a special Clearing Account (type: bank account) if you don't have one. You would use it only for resolving issues like this, the balance of this account should always be 0 once you finish the recording of your transatction.

- Create a $10 Refund receipt to be funded from Clearing account. After that you would have -$10 balance on the clearing account.

- In your Bank account write this $9.31 decrease as a transfer to the Clearing account. This would increase the balance of you Clearing account on $9.31 making it -$0.69.

- Create a Deposit to Clearing account, chose "Add other funds to this account", select the account you use for tracking merchant fee and enter $0.69 amount. The total for you Clearing account becomes 0.

Now you have two records in the Sales section and two records on the merchant fee tracking account (Increase when you pay the comission and decrease when you Deposit this ammount to the Clearing account).

Hope this helps (and I am also interested to see the comments with the explanation of possible drawbacks of this approach).

View solution in original post

francisconeto · ‎October 15, 2018

My initial idea was just to create a refund receipt of $10 in costumer's profile, match it with the $9.61 bank withdraw, and resolve the 0.39 difference as a bank fee reimbursement. The problem with that simple approach is that Quickbooks doesn't show refund receipts of different amounts to be matched. Then I've tried to do a Journal Entry: Debit $10 income acct (linking costumer on name column); Credit $9.61 bank account; and Credit $0.39 merchant/bank fees. Then, I was able to link the JE to the $9.61 bank transaction, but the $10 refund doesn't show up on my costumers profile and I couldn't find a way to link that to costumer. So, even though the bank transaction is resolved, I can not track that refund on costumer's profile.

francisconeto · ‎October 15, 2018

Well, I've called Quickbooks support and as of today Quickbooks does not show refund receipts to be matched with bank transaction of higher amount. There are 2 possible workarounds:

1) Manually adding to the account's Register:
1.a) Create the refund receipt of $10 (and it will automatically be include into the account's Register)
1.b) Delete the $9.61 bank transaction that is to be matched.
1.c) Manually add a deposit of $0.39 as merchant/bank fee into the account's Register.

2) Alternatively, create a Non-inventory product/service for the merchant/bank fee:
2.a) Create product/service -> non-inventory
2.b) Set the income account of the product as the expense account for merchant/bank fee
2.c) Create the refund receipt of $10 and add a line of -0.39 of the merchant/bank fee non-inventory product/service.
2.d) Match $9.61 bank transaction with the $9.61 refund receipt.

I personally preferred solution 1 as the merchant fee doesn't show up on the refund receipt.

sergeykryukov · ‎October 15, 2018

Franciso, please see my responce below. I hope this would help.

sergeykryukov · ‎October 15, 2018

The problem with approach 1 is that the records in you bank account will not match the Statement from your bank. The additional problem with the approach 2 is that you distort your sales report by showing a sale of all those non-inventory items. So it's better to this this via Clearing account.

sergeykryukov · ‎October 15, 2018

There are something I don't like in Lynda's approach.

Here is the thing:

I would like to keep my sales and expenses to do that sale separate. So I would prefer to have a record of $10 sale and $0.69 processing fee (stored in the special Expense or Cost of Gods sold account).

If you edit you Refund Receipt to have a value of $9.31 you decrease your sale to $9.31 and the total will be positive sale of $0.69 (balanced by the expense of $0.69).

For me this distorts later analysis of your sale.

(comment: After submitting my answer I have realised, that Lynda's point is to add Non-inventory item for which sales goes to the Expense account, instead of Income account, but this looks odd to me).

I would prefer to have a pure Refund Receipt of $10 matched to the Sales Receipt of $10 and Expense of $0.69 balanced to the Deposit to that account of $0.69 as a processing fee refund.

So, what you can do:

- Create a special Clearing Account (type: bank account) if you don't have one. You would use it only for resolving issues like this, the balance of this account should always be 0 once you finish the recording of your transatction.

- Create a $10 Refund receipt to be funded from Clearing account. After that you would have -$10 balance on the clearing account.

- In your Bank account write this $9.31 decrease as a transfer to the Clearing account. This would increase the balance of you Clearing account on $9.31 making it -$0.69.

- Create a Deposit to Clearing account, chose "Add other funds to this account", select the account you use for tracking merchant fee and enter $0.69 amount. The total for you Clearing account becomes 0.

Now you have two records in the Sales section and two records on the merchant fee tracking account (Increase when you pay the comission and decrease when you Deposit this ammount to the Clearing account).

Hope this helps (and I am also interested to see the comments with the explanation of possible drawbacks of this approach).

francisconeto · ‎October 15, 2018

Hi Sergey, thank you for your comment!

I believe your approach would work.

As I don't have many transactions of this type, I would still prefer that approach 1 that I mentioned "Manually adding to the account's Register" because it seems less entries and less work.

But for people who have many transactions of this type, I believe your approach would result in much clearer books.

sergeykryukov · ‎October 15, 2018

Hi Francisco,

OK I see your point and would agree in your case.

As for us - we have lots of orders coming from our website as well as from Amazon etc. They are being synchronised via Cloud Cart Connector, so all refund receipt are automatically created. And we believe that our approach is better for our case.

lyndaartesani · ‎October 15, 2018

Are you entering these manually? If so you could still show the $10.00 refund to the customer but also account for the refund of the merchant fee (so instead of the $10 being the total of the deduction, you only have a net transaction of $9.61. You will need to have an item for the merchant fee that points to the bank service charge or the acct. you use for that. You would enter the merchant charge as a negative amount.

$10.00 (income acct)

-.39 merchant/bank fees (to show the reimbursed amount)

Net item receipt: $9.61

francisconeto · ‎October 15, 2018

Hi Lynda, yes I'm entering it manually. My initial idea was just to create a refund receipt of $10 in costumer's profile, match it with the $9.61 bank withdraw, and resolve the 0.39 difference as a bank fee reimbursement. The problem with that simple approach is that Quickbooks doesn't show refund receipts of different amounts to be matched. Then I've tried to do a Journal Entry: Debit $10 income acct (linking costumer on name column); Credit $9.61 bank account; and Credit $0.39 merchant/bank fees. Then, I was able to link the JE to the $9.61 bank transaction, but the $10 refund doesn't show up on my costumers profile and I couldn't find a way to link that to costumer. So, even though the bank transaction is resolved, I can not track that refund on costumer's profile.

lyndaartesani · ‎October 15, 2018

Did you make the refund in the journal entry to accounts receivable? You have to add the customer name to the transaction as well.

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Matching bank withdrawal of different amount to refund receipt