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I have a vendor that was overpaid. They sent a refund check for the overpayment. How do I record the transaction?

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Michael K

I have a vendor that was overpaid. They sent a refund check for the overpayment. How do I record the transaction?

Happy to help out, @jolene6.


How you enter the refund depends on how you record your vendor expenses. If you aren't sure, I recommend reaching out to your accountant. 


Step 1: Enter a vendor credit

This makes sure the credit hits the expense account you use for this vendor.


  1. Go to New ⨁, then Vendor credit or Receive vendor credit.
  2. In the Vendor drop-down, choose your vendor.
  3. Depending on how you record purchases with this vendor, enter the Category details or Item details. Usually, this is the category, product, or service you’re getting a credit for.
  4. Hit Save and close.


Step 2: Deposit the money you got from the refund


  1. Navigate to New ⨁, then Bank Deposit.
  2. In the Account drop-down menu, select the account where you got the refund.
  3. In the Add funds to this deposit section, fill out the following fields:
    • Received from: Select the vendor who gave you the refund.
    • Account: Select Accounts Payable.
      • Important: You need to pick Accounts Payable so you can tie the refund to the vendor credit. This may seem a little strange, but it’s the best way to do this.
    • Payment method: Enter the method your vendor used to refund you.
    • Amount: Enter the amount of your refund.
  4. Click Save and close.


Step 3: Use Pay Bills to connect the bank deposit to the vendor credit

Even though you aren’t paying a bill, this is the right thing to do. This last step is to keep your vendor expenses accurate.

  1. Head to New ⨁, then Pay Bills.
  2. Choose the bank deposit you just created. You’ll see the amount of the vendor credit in the Credit Applied field. The Total payment should be $0.00.
  3. Hit Save and close.


There you go! You've just recorded a vendor refund. For more information, I recommend checking out this thread. There's lots of discussion on how you can achieve this in different ways. You can choose the best way that works for you if you don't prefer the method I've provided.


Shoot me a reply if you have any other questions. I'm here for you. Have a good one!

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