QBO: How to Handle Vendor Refunds

First, locate the original transaction and make a note on the Account/Product/Service line item(s) being refunded. This is important to complete the remaining tasks.

Create a Vendor Credit for the Refund (Accounts Payable Entry)

1. Click the “+” icon and choose Vendor Credit.
2. In the “Choose a vendor” field, Enter the vendor issuing the refund.
3. Enter the date of the refund. If not refunded yet, enter the date the refund was initiated.
4. Using the information gathered in the beginning of this How To, enter the corresponding information into either the “Account Details” section or the “Item Details” section, depending on how this information was entered into the original transaction. This information should be entered the exact same way as the original transaction.
5. Enter any additional notes in the “Memo” field.
6. Attach vendor documentation and/or receipts if necessary.
7. Click Save and close.

Process the Refund with Bank/Credit Card.

1. Click the “+” icon and choose Journal Entry.
2. Enter the date the refund was (or will be) processed. This could be a date in the future.
3. In the “Journal no.” field, enter your initials followed by the word “refund”. ie “MRC refund”
4. In the first row, enter your Accounts Payable account into the “Account” column.
5. Enter the amount of the refund into the “Credits” column.
6. Enter the name of the vendor issuing the refund into the “Name” column.
7. In the second row, enter the account that is receiving the refund in the “Account” column. This is usually a bank or credit card account.
8. The amount should automatically be entered into the “Debits” column. If not, enter the amount of the refund into the “Debits” column.
9. Click Save and close.

Apply the Refund to the Vendor.

1. Click the “+” icon and choose Pay Bills.
2. Click the □ “Check Box” next to the name of the vendor issuing the refund. The “Ref No.” column should show the “Journal no.” that you entered previously.
3. Once clicked, the “Credit Applied” column should automatically fill in with the credit amount.
4. Be sure that the “Total Payment Amount” in the upper-right corner reads “$0.00”, as we are not actually entering a bill but simply applying the refund.
5. Click Save and close.