Hi My business takes security deposits from clients against potential damage caused during events. If no damage is caused, I refund that security deposit in full after the event. During a live chat with QB, I was told that to record that refund I should: create a refund receipt payable from our current account with the product 'Security Deposit' (an other current liabilities account I use for security deposits); andcreate an expense, choosing Debtors as the category.When I do that, the customer transaction list shows: Invoice £1000Expense £1000Refund (£1,000)Balance £1,000Is this correct. I would expect the customer transaction list to show a zero balance after the refund. Should I delete the expense and just rely on the refund receipt? I have checked the Security Deposits account and it does show a decrease of £1,000 if I issue a refund receipt but do not create an expense. Any help would be much appreciated! Thank you.

A

Anonymous

Solved

Record a security deposit refund to client

Forum|Forum|7 years ago
April 17, 2019
4 replies
5 views

Hi

My business takes security deposits from clients against potential damage caused during events. If no damage is caused, I refund that security deposit in full after the event. During a live chat with QB, I was told that to record that refund I should:

create a refund receipt payable from our current account with the product 'Security Deposit' (an other current liabilities account I use for security deposits); and
create an expense, choosing Debtors as the category.

When I do that, the customer transaction list shows:

Invoice £1000
Expense £1000
Refund (£1,000)
Balance £1,000

Is this correct. I would expect the customer transaction list to show a zero balance after the refund. Should I delete the expense and just rely on the refund receipt? I have checked the Security Deposits account and it does show a decrease of £1,000 if I issue a refund receipt but do not create an expense.

Any help would be much appreciated! Thank you.

QuickBooks Online

Best answer by payment after leaving

Hi john-pero

When you create a refund receipt, in the UK product, it will take into account the inventory/product service by crediting it back to your quantity on hand and also accounting for the VAT, decreasing the amount in the VAT control account, there is no need to create a separate expense.

john-pero

Level 12

If you are issuing a cheque for the refund there should only be a cheque with the deposit item as detail.

If you are applying the deposit to their open balance create a customer credit memo that records only the reduction in deposit and apply the c.m to their invoice.

There is no expense to you in refunding the deposit since it was never income. The rep may have meant use the "expense" screen to record the transzction

T

TaliaI

Level 8

Hello PH2019,

The correct steps to record a refund are as follows:

1. Create a credit note, reflect the original invoice using the same account, same amount and same VAT code.

2. Create an expense - Select the customer and the account you paid the refund from. Select Debtors as the category and enter the whole amount using No VAT as the code.

3. Link the two together by going to '+' and then Receive Payment. Once you select the customer, the expense and credit note should show to tick.

Are these the steps you were given by the agent?

Thanks,

Talia

john-pero

Level 12

@TaliaI wrote:

Hello PH2019,

The correct steps to record a refund are as follows:

1. Create a credit note, reflect the original invoice using the same account, same amount and same VAT code.

2. Create an expense - Select the customer and the account you paid the refund from. Select Debtors as the category and enter the whole amount using No VAT as the code.

3. Link the two together by going to '+' and then Receive Payment. Once you select the customer, the expense and credit note should show to tick.

Are these the steps you were given by the agent?

Thanks,

Talia

In receiving an original Security Deposit as a Current Liability there should have been no VAT affect. DO you pay VAT when you borrow money from Barclays or RBS? I think not. The received security deposit (as described by @579082 ) is sitting as a current liability. All that is required is to liquidate the current liability - do you have to code VAT as "no VAT" when you pay principal on a loan? Strange system you have if you do. IN any event the current liability is already sitting on the books. You are suggesting too many steps.

And it all depends on whether A. a cheque is to be cut or B. if the deposit is to be applied to the customer balance.

So I will repeat

A. create a cheque the detail debits Security Deposit current liability

B. 1. create credit note > debiting the Security Deposit current liability

2. apply credit note to customer balance whilst receiving other payment(s)

Life is too short for any steps 3 and 4

A

Anonymous

Thank you both for your help.

I remain a little confused by the Balance column for the customer. I was advised by QB to create a refund receipt and also an expense, but nothing about linking them together. Without taking step 3 suggested by @Talial, I now have the entries for the customer as set out in the attached screenshot. The Total column shows a zero balance, but the Balance column shows £2,000. Is that correct?

As before, any help would be very gratefully received.

P

payment after leaving

Level 10

Hi PH2019

When you use a refund receipt to refund a customer you do not need to create an additional expense.

If you have created an invoice and received payment for the invoice and then you are returning the amount to the customer you would simply create the refund receipt, ensuring you enter in the Refund From column the bank account you refunded your customer from and in the PRODUCT/SERVICE column you enter the same product service as in the original invoice.

If you do the above steps and only have an invoice, invoice payment and refund listed in your customer transaction list the open and overdue amount should be zero.

john-pero

Level 12

@payment after leaving wrote:

Hi PH2019

When you use a refund receipt to refund a customer you do not need to create an additional expense.

If you have created an invoice and received payment for the invoice and then you are returning the amount to the customer you would simply create the refund receipt, ensuring you enter in the Refund From column the bank account you refunded your customer from and in the PRODUCT/SERVICE column you enter the same product service as in the original invoice.

If you do the above steps and only have an invoice, invoice payment and refund listed in your customer transaction list the open and overdue amount should be zero.

This simplified procedure ignores GST and/or inventory. Those two reasons are reason enough to consider creating the credit note as part of the sequence.

As far as expense. you ARE creating an expense by reducing income in the refund. Semantics but is the same. ContraIncome (negative income) = Expense. Above the line, below the line> bottom line the same.

But in the poster's situation there is no expense since it is a return of a security deposit which was never income. Using the "Expense" screen to record outflow of cash or application of same towards something else does not make it an 'expense', only an expenditure so don't confuse instructions to use the Expense rather than Cheque screen to record money out. The Cheque screen can only deduct from bank type accounts whereas the Expense screen can deduct from not only bank but also current asset accounts.

P

payment after leavingAnswer

Level 10

Hi john-pero

When you create a refund receipt, in the UK product, it will take into account the inventory/product service by crediting it back to your quantity on hand and also accounting for the VAT, decreasing the amount in the VAT control account, there is no need to create a separate expense.

T

TaliaI

Level 8

Hello,

Using the refund receipt, the steps are as follows: 1. Create the invoice. 2. Receive Payment. - The balance for the customer will be at 0. 3. You will then create the refund receipt for the same amount - after saving this the customer balance should stay at 0.

Did you follow the above steps? If so, and your customer still shows a balance, please send us a screenshot (of course cutting out any confidential information) of the customer's transaction list so we can look into this further.

Thanks,

Talia

Sign up

Login with SSO

Let's get you signed in

Login with SSO

Scanning file for viruses.

This file cannot be downloaded