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Handle supplier credits and refunds in QuickBooks Online

SOLVEDby QuickBooksQuickBooks Online12Updated June 10, 2022

Enter a credit from a supplier

How you enter the credit depends on how you record your purchases. Choose the section below that applies to you. If you’re not sure, ask your accountant.

Use these steps if you enter bills to track your expenses. This makes sure the credit hits the expense account you use for this supplier.

Create a supplier credit

  1. Select + New.
  2. Select Supplier credit.
  3. In the Supplier dropdown, select your supplier.
  4. Depending on how you record purchases with this supplier, enter the Category details or Item details. Usually, this is the category, product, or service you’re getting a credit for.
  5. Select Save and close.

Apply supplier credits to a bill

You can apply a supplier credit toward any open or future bill. When you’re ready to use the credit, here’s how to do it.

  1. Select + New.
  2. Select Pay bills or Pay bill.
  3. Select a bill for your supplier from the list. You'll see the available credit with this supplier in the Credit Applied field.
  4. Complete the rest of the fields like you normally do.

To track credits for your suppliers, you should consider entering bills in QuickBooks. This way, you can track your account balance and credits using Accounts Payable. Otherwise, you can enter a note to remind yourself about this credit in the future.

How do I handle supplier credits and refunds?

The following section provides steps in handling supplier credits and refunds. If you're not sure when to use Pay Bills and Write Cheques, see What is the difference between bills, cheques and expenses?

In QuickBooks Online, you enter a supplier credit to record returns to suppliers or refunds from suppliers. A supplier might supply you with a credit document that indicates you no longer owe the amount stated on the document, or the supplier might issue a refund cheque to you:

  • If a supplier issues a credit document, you enter a supplier credit and then apply it when you pay the supplier's bill.
  • If a supplier issues a refund cheque to you, you still enter a supplier credit, but you also enter a deposit and then link the deposit to the refund cheque.

Please follow the below scenario depending on which one works best for you. If you are unsure, we recommend speaking directly with your accountant first.

Scenario 1: Link a supplier refund to a supplier credit

Step 1: Enter the supplier refund cheque in the Deposits screen

  1. Select + New.
  2. Select Bank Deposit. Here is where to find this: Bank deposit
  3. In the Add funds to this deposit section, fill in the following fields:
    • Received from: Select or enter the supplier name.
    • Account: Select the Accounts Payable account.
    • Amount: Enter the cheque amount. Here is an example of a completed Bank Deposit: Bank Deposit completed
  4. Select Save and close.

Step 2: Link the deposit to the supplier credit

  1. Select + New.
  2. Select Expense or Cheque.
    Note: Both Expense and Cheque recognise and record expenses. When you use Cheque, the transaction adds to the list of cheques that you can print.
  3. In the Payee dropdown, select the supplier name.
  4. Leave the Ref/Cheque no., Payment date, Amount and Memo fields blank.
  5. In the Add to Expense or Add to Cheque section, select Add for the outstanding supplier credit and deposit. Here’s a screenshot of where this is located: Add to cheque
  6. Select Save and close.

Scenario 2: Pay bills using supplier credits

Step 1: Enter the supplier credits

  1. Select + New.
  2. Select Supplier Credit.
  3. In the Supplier field, select the appropriate supplier name.
  4. Enter the Date, Amount, and Account (the account used here is typically the original expense account on the original bill).
  5. Select Save and close.

Step 2: Pay the bill using the supplier credits

  1. Select + New.
  2. Select Expense or Cheque.
    Note: Both Expense and Cheque recognise and record the expense. When you use Cheque, the transaction adds to the list of cheques that you can print.
  3. In the Choose a payee dropdown, select the supplier name.
  4. Leave the Ref/Cheque no, Date, Amount and Memo fields blank.
  5. In the Add to Expense or Add to Cheque section, select Add for the outstanding bill and the supplier credit.
  6. Select Save and close.

To fix this, either go back and delete the bill payments and replace them with cheques, or simply enter one or multiple bills to link the bill payments to.

If you recorded cheques for Suppliers in the Cheques screen and didn't enter bills, you may end up with negative balances for your Suppliers.

To fix this, either go back and delete the bill payments and replace them with cheques, or simply enter one or multiple bills to link the bill payments to.

  1. Select + New.
  2. Select Cheque.
  3. In the Payee dropdown, select the supplier name.
  4. Leave the amount field blank.
  5. In the Add to Cheque section, select Add for the outstanding bill and supplier credit.
  6. Select Save and close.

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