How to Record a Disputed Payment in QuickBooks Desktop/Online?

A chargeback is a process where transactions are disputed, and money is returned to the payer because of disputes or unauthorized transactions. In other words, the sale is charged back to you. Recording it correctly in QuickBooks is important for proper accounting and financial management.

What Is a Disputed Payment and Why Is It Important to Record It in QuickBooks?

A chargeback is defined as a transaction reversal initiated through a customer’s bank or payment processor because of a dispute or unauthorized transaction. It is important to record it correctly in QuickBooks for proper accounting and financial management.

Checking the accurate recording of chargebacks in QuickBooks is important for maintaining the integrity of financial records. Chargebacks can have a significant influence on the reconciliation of accounts, as they impact the balance of transactions and might result in refunds.

Correctly accounting for chargebacks lets you maintain transparency and allows businesses to record customer disputes efficiently. Through this accurate recording in QuickBooks, all businesses can analyze patterns, recognize areas for improvement, and make well-informed decisions to minimize future chargebacks.

How to Record a Disputed Payment in QuickBooks Desktop?

To record a disputed payment in QuickBooks Desktop, either record it as a refund through the Customer menu or write a check via the Banking menu. Both methods ensure accurate bookkeeping.

Mentioned below are the two ways you can choose either:

1. Record the payment as a refund or
2. Write a check

Record the Transaction as a Refund

Below are the steps through which you can enter a disputed payment through a refund:

1. First, go to the Customer menu and then select Credit Memos/Refunds.
2. Now, choose the customer you wish to refund in the Customer: Job drop-down menu.
3. Then, enter the product and service you want to refund.
4. Click on the Save & Close option.

5. After this, you’ll be prompted to go to the Available Credit window.   
6. Select to Give a Refund and then click on the OK option. 
7. If prompted, choose how you want to refund the transaction from the Issue window. The drop-down menu on the Issue a Refund window allows you to make this Refund. 
8. Moreover, if you select Cash or Check, choose the account used to pay the Refund.    
9. Lastly, click OK when finished.

Record the Transaction as a Business Expense

This is another option for recording a disputed payment in QuickBooks Desktop as a business expense by writing a check. Checks are considered written orders to a bank to pay a certain amount to the person who is depositing them. They’re known to be as good as cash.

1. Write a check 
2. Regular checks 

You commonly use regular checks to pay for your fixed assets, inventory, non-inventory parts, services, other charges, and any other expense that you track in QuickBooks Desktop. You also have the option to keep this money in a petty account or pay credit dues.

Follow the steps mentioned below to write checks:

1. First, go to the Banking menu. 
2. Now choose Write Checks. 
3. Then, click on the Expense tab to include shipping charges, liabilities ( in case of payments for liabilities/loans), and other expenses not related to any item in QuickBooks.   
4. Click on the Item tab to select the relevant item from the drop-down list. 
5. Lastly, press the Save and Close button. 

Alternatively, you can follow the steps mentioned below to keep your invoice unpaid:

1. Navigate to the Customers menu, then press on the Customer Center. 
2. Now, locate and choose the customer from the Customers & Jobs tab. 
3. Then, select the Received Payments from the show drop-down menu in the Transactions section. 
4. After this, click twice on the payment and click the Delete button at the top. 
5. Lastly, press the OK button. 

Manually Record a Chargeback in QuickBooks Desktop

You’re suggested to record a chargeback manually as QuickBooks Desktop doesn’t track a refund or chargeback in a single transaction. Moreover, you’re required to make different entries to track the chargeback and the Refund.

You can create a check that affects Accounts Receivable and then set up an expense fee for the chargeback in QuickBooks Desktop. This procedure will bring a positive balance to the customer profile, take out the money from the affected bank, and record the fee for the chargeback.

Follow the steps mentioned below to create a check manually:

1. Navigate to the Banking menu and choose Write Checks. 
2. Now, select the Bank account where the check will get posted. 
3. Then, enter the name of the customer in the Pay to the order of. 
4. After this, type the total amount of the Refund or credit. 
5. Under the section for Memo, Itype the Credit Memo number. 
6. Go to the Expenses tab. 
7. Choose Accounts Receivable from the Account column. 
8. Now, type the amount of the Refund and then the name of the customer. 
9. Lastly, click the Save and Close button. 

How to Record a Disputed Payment in QuickBooks Online?

To record a disputed payment in QuickBooks Online, either process it as a refund or record it as a business expense. Both methods ensure accurate financial records and account reconciliation.

There are two ways through which you can record a chargeback in QuickBooks Online: 

1. Process the transaction as a refund or 
2. Record the transaction as a business expense

Either way, the disputed payment will be displayed on your bank statement as a separate item.

Follow the steps below to enter a chargeback in QuickBooks Online:

Record the Payment as a Refund

1. First, click on the + New icon and then choose Refund Receipt or Give Refund. 
2. Now, select the customer from the Customer drop-down menu to select who you want to refund. 
3. Then, select the Refund Receipt date. 
4. After this, enter the details about the original sale for which you wish to issue a refund in the table. 
5. Type the amount you wish to refund. 
6. Choose the credit card that is used for the original payment from the Payment Method drop-down list. 
7. Now, select the bank where you’ve deposited the payment for the invoice in the Refund From drop-down menu. 
8. Attach all the products or services that the customers have returned in the Product or Service section. 
9. Ensure that you’ve entered all the information for the Refund and press Save. 
10. Select Print if you want, which is under the Credit Card Transaction Status window. 
11. Lastly, click on the Close tab. 

Record the Transaction as a Business Expense

1. First, choose the + New icon and then click Expense. 
2. Now, select the Bank account and the customer name that you used for the original credit card payment transaction from the Payee drop-down menu. 
3. Then, delete the check number ( you can write a note to show that this check is a chargeback). 
4. Choose the Payment Account, Payment date, and Payment method. 
5. Clear the Print Later checkbox. 
6. After this, click on the account from the Account section that you charge for the transaction. 
7. Enter the complete amount of the chargeback item. 
8. Lastly, click the Save and Close button. 

Once done, you also have the option to run the Customer Balance Summary report to get an idea about the payments and invoices that make up every customer’s current outstanding balance. For this, just go to the Reports menu and then choose the Customer Balance Summary report. 

Recording a disputed payment is important to maintain the integrity of financial records statements in businesses. Chargebacks can have a significant impact on the reconciliation of accounts as they make discrepancies in your financial data and might result in refunds, disputes, or unauthorized payments.

Frequently Asked Questions

How Do I Record a Disputed Credit Card Charge in QuickBooks?

To record a disputed credit card charge in QuickBooks:

1. Log in to QuickBooks.
2. From the left-hand menu go to “Banking” > “Enter Credit Card Charges” and input the details.
3. Set up a “Credit Card Disputes” account under Other Current Liabilities.
4. Create a journal entry debiting the “Disputes” account and crediting the credit card account for the disputed amount.
5. Reverse the entry once the dispute is resolved.

How to Fix Disputed Payment in QuickBooks?

Here’s a step-by-step guide on how to fix a disputed payment in QuickBooks:

1. Log in to QuickBooks.
2. From the left-hand menu, click on “Sales“, then “All Sales.” Find the disputed payment.
3. Check the invoice and payment history for errors.
4. If necessary, issue a refund (via “Refund Receipt“) or create a credit memo for future use.
5. For bank chargebacks, adjust your records using the “Make General Journal Entries” feature.
6. Add notes and attach any relevant communication to the transaction.
7. Ensure the adjustment is reflected correctly during reconciliation.

How to enter disputed ACH transaction in QuickBooks?

Follow the step-by-step information given below:

1. Click the +New icon and select Check.
2. Choose the bank account where the check will be issued from.
3. Select the customer who made the original credit card payment.
4. Delete the check number field (optionally, enter a note to indicate that this check is related to a disputed transaction).
5. Enter the total amount that is being disputed and add the relevant item.
6. Add another line item for any charge fees and enter the amount.
7. Ensure the Print Later checkbox is cleared.
8. Choose the account that corresponds to the charge for the transaction.
9. Click Save and Close to complete the transaction.

Disclaimer: The information outlined above for “How to Record a Disputed Payment in QuickBooks Desktop/Online?” is applicable to all supported versions, including QuickBooks Desktop Pro, Premier, Accountant, and Enterprise. It is designed to work with operating systems such as Windows 7, 10, and 11, as well as macOS.