Going a little crazy here: Please help in issuing a partial refund and recording it properly.

I appreciate the detailed steps you've performed for the partial refund, Ballentine. When refunding a security deposit, you must first issue a check for the portion to be refunded and record an invoice for the remaining amount. Then, create a credit memo instead of a journal entry to correct the liability account and zero out the balance. Let me help share more details about it.

Since you issue a partial payment for the security deposit and post it to a liability account, you need to create a credit memo instead of a journal entry for the amount that is not being refunded.

To enter a credit memo for the un-refunded amount:

1. Select + New.
2. Under Customers, select Credit Memo.
3. Select the item you created from the drop-down list in the Product/Service field.
4. Enter the amount that is not being returned to the tenant in the Amount field.
5. Select Save and Close.

Once the credit memo is created, the next step is to apply the credit to the invoice you created. To apply the credit to the invoice:

1. Select + New.
2. Under Customers, choose Receive Payment.
3. Verify that the credit and invoice are both selected and that the amounts are equal.
4. If you don't see the credit and the invoice, they have been automatically applied, and you can select Cancel to skip this part of the process.
5. Select Save and Close.

Once done, it will show a zero balance. For more details on how to return a part of a security deposit, see this article: Refund a security deposit in QuickBooks Online.

Additionally, you can get more tips about accepting electronic customer payments and void transactions in QuickBooks Payments: 

• Take and process payments in QuickBooks Online with QuickBooks Payments
• Void or refund transactions in QuickBooks Payments

Please let me know if you have follow-up questions while processing refunds to your customers. I'm just a few clicks away to help. Have a good one!

Thank you for your reply. To clarify my circumstances:

Per #2: The journal entry was just to allocate the security deposit portion of the full payment to the liability account. I.e., It takes the payment and keeps $400 in A/R and designates $100 as liability (the Security Deposit account). I'm not saying that's correct, just that it's what I read to do to designate the $100 as something I had to refund at some point. Should I not even bother with that?

I tried the Credit Memo method (instead of Refund Receipt), and found I also had to enter a bank deposit of -$100 to show the removal of the security deposit from bank account ZZZ (where it was deposited). Applying the Receive Payment ended up with an extra entry in Security Deposit (if I remember right...I tried so many things). However, I had the initial journal entry there as before, so again, is that not something I should be doing and just keep the full payment as A/R and not try allocating to Security Deposit?

And While I have you, is there a way to streamline this through Quickbooks Online. I see a Refund option in the original payment, but in my tests with small payments ($3), it didn't give me an option to do a partial refund. Is that an option for larger amounts, like $100+? I only used Merchant Account, because I don't have access to credit card details and didn't know another way.

Thanks for sharing additional clarification, Ballentine. I'm here to provide the steps to record the refund accurately.

The instructions shared by my colleague are applicable if you start the refunding process by issuing a check for the security deposit. You can follow the rest of the steps below to apply the credit memo and zero out the balance.

Here's how to create a check:

1. Go to + New and then select Check.
2. Enter the check information.
3. In the Account details section, select the liability account you use for security deposits from the Account column dropdown list.
4. Select Save and close.

Then, add a product or service item needed to create an invoice for the un-refunded part of the amount:

1. Go to the Gear icon and then select Products and services.
2. Select New.
3. From the Product/Service information panel, select the appropriate type of item to create.
4. Enter the product or service information for the item.
5. Click Save and Close.

Once done, create an invoice for the un-refunded portion of the deposit:

1. From + New, choose Invoice.
2. Select the item you created.
3. Enter the part of the deposit you're not returning in the Amount field.
4. Hit Save and close.

After that, you can follow the steps shared by my colleague to complete the refund process. For more guidance, please see this article: Refund a security deposit in QuickBooks Online.

Please note that the steps above don't require creating a journal entry or refund receipt. If you prefer not to start over, I recommend consulting an accountant. They have the expertise to provide assistance and alternative options to help you properly record the refund without messing up your books. If you don't have one, I suggest using our Find QuickBooks Certified ProAdvisor tool to look for an expert near you.

Moreover, you can contact our QuickBooks Support Team to have someone guide you via phone or chat. They also have a secure screen-sharing tool to ensure everything is recorded accurately.

Finally, I suggest running and customizing your QuickBooks reports to track how your business is doing and focus on different aspects of your books (such as your sales, spending, and other parts).

Please know that you're always welcome to post here in this thread if you need additional assistance throughout the process. You can also share your other questions or concerns about creating sales entries and tracking refunds. I'm ready to help.

Thank you for your reply, but I need to clarify further.

I sent the customer an invoice. The invoice included a line item for the security deposit. The customer paid the entire invoice ($500), which included the $100 security deposit. The payment was automatically recorded through Quickbooks. I can find that payment through All Sales in Quickbooks Online.

PLEASE, if you could, answer the questions I had in my previous reply.

@JoesemMAre you able to answer my questions? Someone else replied, but I'd like an answer that follows our previous discussion. Thanks.

Hello there.

I appreciate what you've done so far, @Ballentine. I'm here to help you get the best help with finding overall concern in QuickBooks Online.

I recommend contacting our QuickBooks Online live support so they can take a look at your QBO account and can properly assist you with the correct recording of refund and deposits.

Here's how:

1. Head to this link: Contact Us.
2. Select QuickBooks Online product and click Continue.
3. Select Contact Us and choose a way to connect with us:

• Start a chat with a support expert.
• Get a callback from the next available expert.

If you send an invoice to your customer and it automatically records after they paid, this could be due to the Automatic Apply Credit feature turned on. However, this could also be caused by lots of factors.

Since you're dealing with journal entries already, I also recommend consulting with a professional accountant. This way, they can help you record everything correctly and keep your books accurate. You can check out this article to look for an expert near you: Find a QuickBooks Certified ProAdvisor tool.

Additionally, you can check out the deposit speeds in QuickBooks Payments to learn when the payments are being deposited to your account.

Please don't hesitate to reply if you need further concerns with QBO. I'm here to assist you any time.

@Ballentine   I am sorry you have to find out this way, but exceedingly few of the QuickBooks 'staff' here are people. Most of them are poorly designed AI.

For example, there is this gem: https://quickbooks.intuit.com/learn-support/en-us/do-more-with-quickbooks/how-impressed-i-am-at-how-...

You will rarely ever get the same one to reply in succession.

Yes, I kind of figured that. I've been working with ChatGPT, Claude and Gemini to get my answer, and the way they start over with a different method, repeat instructions and run you around in circles is very similar to my experience here.

AI is really great in a lot of things, including tutorials, but it's REALLY BAD with helping with Quickbooks Online. It's so frustrating. I've been trying to get this worked out for a week in a half, but it's difficult when you're constantly told: Do ABC...ABC won't work, do DEF...no, do GHI...you can do ABC, but you also need to do IHJ...etc.

That's why I tried to get the original person to answer my questions, because it seemed like maybe that was an actual human. Is there a way to call Quickbooks and talk to someone? It's pretty ridiculous to pay so much for a service and receive no effective support for something that should be so simple.

Hi there, @Ballentine. I acknowledge your effort in posting to the Community concerning issuing a partial refund in QuickBooks Online (QBO). Please know that isn't the kind of expression that we want to get from you from assisting you with this topic.

To get assistance from our Customer Care Team, I suggest you follow the steps below to begin. With our support, you can share your queries on live and be able to share your screen to allow them to see your company file and examine what you have already started to record the transaction while maintaining your privacy: 

1. Sign in to your QuickBooks Online account.
2. Click the Help button.
3. In the QuickBooks Assistance chat box, select Talk to a Human or tap the Contact Us button at the bottom.
4. Then, type in your reason for contacting us in the What can we help you with? Box and click Continue.
5. From there, choose a way to connect: Chat with us, get a Callback, or call our support line directly by getting our Phone number.

Additionally, refer to this article for other options when contacting them. You can also scroll down to the bottom to see their phone number, support schedule, and hours to contact them at the time of your convenience: QuickBooks Online Support.

For any additional help, please do not hesitate to post your queries here. You can click the Reply button, and I'll be right away to assist. Stay safe!

@Ballentine  I don't know how useful the QuickBooks support team would be even if you did contact them, and I haven't had much to do with merchant payments myself.

That said, @BigRedConsulting  and @Rainflurry  are quite competent and have helped a lot of people here. They may have a good answer for you if they notice this ping.

Thanks. I'll take all the useful help I can get.

@Ballentine 

Not sure why you’re making a journal entry.  If the paid invoice had a line item for the security deposit, use that same item on a Refund Receipt. That should be all you need to do.  

I have probably been doing it wrong, because AI has probably been telling to do it wrong. My understanding was I had to allocate the security deposit portion into a liability account, since it's intended to be repaid, which is why it had me doing the journal entry. It also told me to do the same thing for Tips, since that's being paid out to the employee receiving the tip.

@Ballentine 

Yes, technically the security deposit is a liability but at this point that’s irrelevant because you’re refunding the security deposit and you want to debit the account that was credited by the security deposit line item on the invoice.  You do that with a refund receipt using the same security deposit line item that was used on the invoice.  You don’t want to make any entry to A/R as this has nothing to with A/R.