Vendor bill - 50% Payment - Returned all product - Only partial refund from vendor - Write off of balance paid but not refunded

BeckyC70 · ‎May 29, 2020

We received a bill from a vendor for product, $1,300. Our policy is to pay 50% up front and 50% once the product is fully evaluated, so we gave them a check for $650 (which they cashed). This product did not meet our standards so we returned ALL of it to the vendor. The vendor felt that they deserved some compensation for this so they only gave us a refund of $350, so we will end up having to write off the $300.

In my attempt to search for help it seemed like no matter what I typed it kept showing me the same answer, a link to 'Enter a refund from a vendor' (https://quickbooks.intuit.com/learn-support/en-us/vendor-credits/enter-a-refund-from-a-vendor/00/335...). While this is helpful, I cannot seem to figure out how to use this to accurately reflect what happened. Should I unlink the original 50% payment, then credit the entire invoice (to remove the product from our inventory)? If I do this how would I credit part of the payment and write of the balance of the payment?

I am unsure how to balance all of the pieces of this transaction cleanly in QBO. Any assistance is greatly appreciated. Thank you!

CharleneMaeF · ‎June 01, 2020

Thanks for getting back to us, @BeckyC70.

I'm here to help you write off your vendor's balance.

Go to the + New icon.
Select Journal Entry.
Select the Account field and choose Accounts Payable from the dropdown list.
Enter the amount under the Debit column, tab to the Name column, and select the vendor name from the dropdown list.
In the next line, select the offset account and enter the amount under the Credit column.
Click Save and close.

Once done, let's apply the journal entry to the existing debit/credit.

Go to the + New icon.
Select Pay bills.
Choose the Payment account.
Place a checkmark beside the bill created.
Click Save and close.

Also, I suggest consulting your accountant for further assistance with the process to ensure your books are accurate for your business.

I've included an article that'll help you view all the money paid to your vendor for the year: Report with vendor totals.

Keep me posted if you have additional QuickBooks questions. I'm always here to help.

View solution in original post

AlexV · ‎May 29, 2020

Good day, BeckyC70.

Let me help you in recording returned products in QuickBooks Online.

You're on the right track! For the inventory, you can create an inventory adjustment to decrease your quantity on hand. From the + New button, select Inventory Qty Adjustment. I have an article here for your reference: Adjust inventory quantity on hand in QuickBooks Online.

It'd also be best to seek help from your accountant for the best way to record this.

I'll be here if you need anything else. Wishing you all the best!

BeckyC70 · ‎June 01, 2020

Hi Alex,

I am unsure why I would create an inventory adjustment. Wouldn't a credit memo reverse the inventory?

My thought is to remove the payment from the invoice (leaving it a separate transaction, I will speak to my accountant to figure out how to deal with the partial refund of our deposit). Then I will create a credit memo to clear out the invoice as all of the product was returned to the vendor (so this should adjust the inventory accordingly). If I am incorrect and the credit memo will not adjust the inventory like I am thinking please let me know.

Thank you,

Becky

CharleneMaeF · ‎June 01, 2020

Thanks for getting back to us, @BeckyC70.

I'm here to help you write off your vendor's balance.

Go to the + New icon.
Select Journal Entry.
Select the Account field and choose Accounts Payable from the dropdown list.
Enter the amount under the Debit column, tab to the Name column, and select the vendor name from the dropdown list.
In the next line, select the offset account and enter the amount under the Credit column.
Click Save and close.

Once done, let's apply the journal entry to the existing debit/credit.

Go to the + New icon.
Select Pay bills.
Choose the Payment account.
Place a checkmark beside the bill created.
Click Save and close.

Also, I suggest consulting your accountant for further assistance with the process to ensure your books are accurate for your business.

I've included an article that'll help you view all the money paid to your vendor for the year: Report with vendor totals.

Keep me posted if you have additional QuickBooks questions. I'm always here to help.

dLearned · ‎July 14, 2021

I have a similar problem that this would seem to work for, however, I do not understand why I would select a "Payment account" when I want to use the credit I just created by Journal entry.

Rea_M · ‎July 14, 2021

Let's get this figure out as to why you'll select a Payment account when using the credit from your Journal Entry (JE), @dLearned.

The Payment account is required when applying the JE to the existing credit/debit on the Pay Bills screen in QuickBooks Online (QBO). You can opt to use a clearing acct or a dummy one if you don't want the transaction to be posted on your existing payments accounts.

However, before performing the process above, I encourage you to consult your accountant or find a ProAdvisor (if you haven't already) for further guidance on what's the best way to write off your vendor's balance.

On top of that, I'd recommend pulling up the Journal and Vendor Balance Detail reports. This way, you're able to verify that the transactions you've entered above were recorded accordingly. Go to the Reports menu's Standard tab and search for the mentioned reports.

Drop me a response below if there are other things you need help with. I’m here anytime. Take care and stay safe!

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Vendor bill - 50% Payment - Returned all product - Only partial refund from vendor - Write off of balance paid but not refunded