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Intuit

How do I handle supplier credits and refunds?

The following article 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 cheque to a supplier credit

If the refund is for returned stock items, you need to create 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 drop-down, 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). Here is an example screenshot below:
  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 drop-down, 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 supplier credit. Here's an example for you:
  6. Select Save and close.

Why do I have supplier credits?

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.

To link the Supplier credits with bills, first create the bills. When you're ready to link the bills to Supplier credits:

  1. Select + New.
  2. Select Cheque.
  3. In the Payee drop-down, 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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