Customer Refunds

There are generally many ways to accomplish an accounting task that are all acceptable or "right." The point of your accounts is to report your business activity easily and without working too hard to get at the details. The credit given could be taken directly against sales as a negative value but I prefer a "contra account" where a dr balance exists instead of the usual cr balance for sales. In the Credit Memo/Refunds a item is setup that takes amounts to the contra account and makes the proper entry to reflect actual sales.

Thanks for the reply. As I'm not an accountant it sounds like you're suggesting to definitely use the QB refund functionality which I was assuming makes the most sense. Do you have an idea if the refund functionality will flow through as an "undeposited funds" transaction for the two refunds so that I can combine it into the deposit for my checking account? I currently have 6 sales transactions that I entered into QB Sales Receipts categorized as "undeposited funds" because I know the bank consolidated them all into a single deposit. When i go to the Make Deposit QB functionality which will allow me to combine those six transactions, will the refunds also show up so that I can include them as well? If QB doesn't support this I don't know how I get the 6 sales transactions and the 2 refund transactions to consolidate into the matching $ deposit the bank recorded.

Thanks.

jmack6

So I went ahead and used the QB Refund functionality and as feared, there was never an option to categorize the refund as an "undeposited fund" so the refund was posted to the checking account register directly. I never had an option to consolidate it with the other sales transactions so that I could record an accurate QB net deposit that would match with the bank deposit. So now I have a overstated checking deposit and a refund that is a line item in my checking account register but is not a real life checking transaction.

I then tried entering a negative Sales Receipt for the refunds but QB doesn't allow that. So I have created the refund but it doesn't show up as an undeposited fund item that I can select to get the accurate bank deposit. What can I do to get an accurate undeposited funds deposit for the checking account? If this isn't possible then can someone advise on what the proper accounting transactions should look like as both the deposit and the refund are going to be mis-stated?

Any suggestions? Thanks.

jmack6

I appreciate you for sharing detailed information with your concern, @jmack6.

Allow me to make some clarification on recording refunds in QuickBooks Desktop.

To enter a refund in the program, you’ll want to create a credit memo then choose to Give a refund. This is how to handle the said credit and you can easily deposit the funds. Please follow the steps below:

1. Go to the Customers menu, then select Create Credit Memos/Refunds.
2. From the Customer: Job drop-down, select your customer.
3. Enter the items you're giving credit for, then select Save & Close.
4. In the Available Credit window, choose to Give a refund.
5. Enter the necessary information, then press OK

Once done, you can now create a refund check:

1. Go to Customers at the top menu bar and select Receive Payments.
2. From the Received from the drop-down, select the Customer.
3. Then, select the Discounts and Credits icon.
4. In the Available Credits section, select the check you created and then Done.
5. You may see a prompt to Confirm transfer. If you do, select Yes. The amount will be applied automatically to the invoice.
6. Choose Save & Close.

You can look over this article for more info about how to pay back or handle your customer's credits in QuickBooks: How to create a credit memo or refund check in QBDT for Windows.

Most importantly, I recommend seeking help from your accountant to add suggestions based on what's more suitable for your business and to your books.

Let me also add this article that can guide you in adding and reconciling your accounts effectively in your QBDT software: 

• Add and match Bank Feed transaction
• Reconcile an account in QuickBooks Desktop

Keep in touch if you need any more assistance with this, or there's something else I can do for you. I've got your back. Have a good day.

Progress but not solved yet. I followed the create a credit memo process and it appears to work. One thing that I noticed however is that after I save and close I immediately get the "issue a refund" window and if I fill it out and save, I end up with an extra credit transaction in my checking register...so now I'm just cancelling out of it.

Then I go to the customers/receive payment & pull up the customer's name. However--the "Discounts and Credits" icon is greyed out so I can't select it. It appears to me that QB can't find the credit. I'm assuming if it saw the credit it would be available.

I can choose the undeposited funds option which is great--this was one of my questions--but the amount is showing up as a payment & the $ amount is a positive number so that adds to the consolidated deposits instead of subtracting. Also, when I go to the checking account register it's already recorded as a payment which it shouldn't be.

I'm doing something incorrectly so I would appreciate the help. Thanks.

jmack6

Hello there, @jmack6. You're already on the right track in recording customer refunds in QuickBooks Desktop (QBDT). Let me further guide you on the next steps you need to complete the said process.

When you enter a customer credit/refund, you'll be given three options (Please see the attached screenshot below for your reference) on how to handle it. In the Available Credit window, you can either select Retain as an available credit, Give a refund, and Apply to an invoice. You may select Retain as an available credit if you want to keep the credit.

There are other ways on how you can find a customer credit aside from the Receive Payment page. Just go to Customer Center, choose the name of the customer under Customer & Jobs, then filter Credit Memo from the Transactions tab.

Additionally, you'll have to choose either your bank, checking, or credit card account and not through Undeposited Funds while issuing your customer a refund. This is because the payment is already recorded to any of the above-mentioned accounts.

You can check out this article for the step-by-step guide in recording your customer credit or refund: Give your customer a credit or refund in QuickBooks Desktop for Windows.

Also, you'll have to make sure you categorize each of your transactions accordingly. This way, you can keep your financial data accurate, To learn more about this, you can refer to this article: Add bank feed transactions in QuickBooks Desktop.

Finally, I encourage you to reconcile your accounts every month. This is to track your income, expenses, and any possible errors accordingly. You can check out this article for the detailed steps: Reconcile an account in QuickBooks Desktop.

Please don't hesitate to comment below if there's anything else I can assist you with. I'm just around to help. Take care and keep safe.

Thanks for the continued support. To clarify, we actually don't owe the customer a refund as it was issued via Shopify back to their credit card very soon after the original order was placed with us. Shopify recorded the sale then the refund as 2 separate transactions related to the original single sale. Unfortunately the bank pooled together multiple sales including sales not related to the sale that was refunded, into a single deposit that day. This means that when I recorded the Sales Receipts for these transactions I need to use "Undeposited funds". If you add all of the sales $ amounts and subtract out the refund $'s then then bank deposit matches. This is what I'm trying to replicate in QB.

So if I want to mirror the Shopify transactions with the accounting for each of the transactions, I need to have the sales and refund $'s flow through undeposited funds to get a net deposit that matches the bank records. How can I do this?

If that's impossible which it seems like you're saying, then I guess I'll just wipe out the Sales Receipt which will effectively eliminate the sale $'s that were recorded, then when I select the correct mix of sales using undeposited funds, I'll end up with the correct bank deposit $'s. I'm not sure that this is a good solution however as there were merchant processing fees associated with the original sale that I don't get back and need to capture. 

Any suggestions? Thanks.

jmack6

Hi there, jmack6.

As you may have been informed, you can only use a bank account in creating a refund in QuickBooks Desktop. Check out these articles to get more details on how to use the Undeposited Funds account:

• What’s The Undeposited Funds Account? 
• Deposit Payments Into the Undeposited Funds Account in QuickBooks Desktop 

I've also read the responses in this thread and it looks like all possible workarounds have been shared. I'd recommend reaching out to your accountant for additional advice on this matter. 

Aside from that, I'd also suggest reaching out to our chat and phone support teams. They can take a closer look at the situation and run some reports with you to check if there are any other workarounds. Here's how:

1. Go to the Help menu and select QuickBooks Desktop Help.
2. Click Contact Us.
3. Give a brief description of your issue.
4. Select Let's talk and then choose a way to connect.

You can also reach out to them via chat using this link: Contact Us. 

Lastly, let me leave this article with you for future reference in case you might need this in your future tasks: Write Off Customer and Vendor Balances.

The Community is always here if you need anything else. 

Is there a cost associated with the suggested support? I only have Desktop Pro. Thanks.

jmack6

I'll share some information, Jmack6.

We have different care plan options for your supported version of QuickBooks Pro. If you want a One-time support plan, the fee is $74.99. The other plans have different prices depending on the benefits that you want.
 

Feel free to check this reference for more information: Care Plans for QuickBooks Desktop.

If you have further questions, you can get back to this thread. Take care!