Proper Transaction Entry for a paid bill and a subsequent refund of payment

Hi, @jjruggeri.

Thank you for reaching out to us here on the Community page. I can help you with recording a vendor refund on QuickBooks Desktop.

First, yes, you need to create a deposit of the vendor check. Here's how:

1. Select Make Deposits from the Banking tab.
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:

1. Go to the Vendors tab, then click on 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.

After that, you're now ready to link the deposit and the vendor credit:

1. From the Vendors menu, select Pay Bills.
2. Check the deposit that matches the vendor check amount.
3. Click on Set Credits and apply the Bill Credit you created earlier then select Done.
4. Tap on Pay Selected Bills, then select Done.

Here's an article you can read more about recording vendor refunds.

I'm also adding this link to learn more about the accounts payable workflows you can use in QuickBooks Desktop.

If you have any other questions with handling your vendor transactions, please let me know by adding a comment below. I'm more than happy to help. Have a good one!

Hello and thank you for your quick response. I have done the first 2 parts but have been unable to complete the 3rd part and linking the check with the credit. Neither show when I try to pay bills.

I appreciate you for keeping me updated about the steps that you've taken, @jjruggeri.

You've got me here to provide additional information to ensure that you can link the deposit to the credit that you made.

When paying bills in QuickBooks Desktop, make sure to check if the bill is in a different account. Know that an incorrect account can be the reason why bills are not showing up in the pay bills section. This usually happens if you have multiple accounts payable.

Once verified and the issue persists, be sure to select Show all bills on the Pay Bills window, then scroll up or down to find your bill. You can also narrow down the bill you’re looking for when you select Due on or before, then specify the date on the Show bills section.

If doing this doesn't make a difference, check if you already paid the bill.

You can run the Transaction List by Vendor report:

1. Go to the Reports menu.
2. Press on Vendors & Payables, then Transaction List by Vendor.
3. Select Customize Report, then Billing Status from the Column section.
4. Hit on OK.

To learn more on what are the best things to do in paying bills in QBDT, please scan through this reference: Learn how to pay your bills in QuickBooks Desktop for Windows and Mac.

I'm also adding here a link that provides steps to perform, which helps isolate data-related issues on your company file in case you need it in the future:  Learn how to fix data damage on your QuickBooks Desktop company file.

Keep me posted on how things turn out or if there's anything else that I can assist you with. I'll be around for you. Take care!