How to Enter Credit Card Refund in QuickBooks? Desktop & Online

To track your finances accurately, you need to know how to enter credit card refunds in QuickBooks, especially if you’re a business owner or accountant. This is important if you accept credit card payments from customers and need to issue refunds for any reason. 

QuickBooks helps you to keep your books up to date and ensure that your financial records are accurate. It allows you to reflect refunds from vendors, adjust your credit card balance and expenses accordingly. This process ensures that any refunds are properly tracked, offsetting the original expenses and keeping your financial statements accurate. 

Why to Enter Credit Card Refund in QuickBooks?

Below are the reasons why to enter a credit card refund in QuickBooks; let’s have a look:

• Updated Financial Records: Entering credit card refund ensures that your financial statements accurately reflect any refunds received, maintaining the integrity of all your accounting data.
• Credit Card Balance Accuracy: It keeps your credit card account balance updated, showing the correct amount owed after factoring in any refunds.
• Better Expense Tracking: By recording refunds, you can properly offset the original expense and check that your profit and loss reports are accurate.
• Compliance and Audit Trail: Properly documenting refunds creates a clear audit trail, helping with tax filings, audits, and overall financial transparency.
• Cash Flow Management: Tracking refunds helps in managing cash flow so that you can clearly track the funds returned to your Account.

When To Enter a QuickBooks Credit Card Refund? 

You need to record a credit card refund in QuickBooks when a charge is reversed or reduced. It helps you to reduce the credit card balance by the vendor credit. You have to enter a credit card refund as soon as you determine a purchase was damaged or unnecessary. The vendor will process the return using the same credit card from which you made the purchase. 

This refund will display on your credit card statement as a reduction in your balance, and you need to enter it on QuickBooks so that your QuickBooks credit card balance is accurate. With QuickBooks, you can enter a credit card refund easily and ensure that your financial records are up-to-date and balanced.

Things to Do Before Recording Credit Card Refund in QuickBooks!

Before recording a credit card refund in QuickBooks, it’s essential to follow these steps to ensure accuracy. Here’s a checklist of things to do:

• Firstly, you need to confirm that the refund has been processed by the vendor and appears on your credit card statement.
• Locate the original expense in QuickBooks to ensure the refund will be applied to the correct purchase.
• Select the correct expense account associated with the original transaction so that the refund offsets it properly.
• Make sure the refund amount matches the original transaction or a portion of it, depending on the nature of the refund.
• Review the date of the refund to enter the correct transaction date in QuickBooks.
• Keep receipts, invoices, or correspondence related to the refund handy for accurate recordkeeping.

Steps to Enter Credit Card Refund in QuickBooks Desktop

Record refunds you received from a vendor to ensure that all refunds are correctly recorded in your accounting system. For this, choose the appropriate scenario and follow the recommended steps to record the refund in QuickBooks Desktop.

Scenario 1: The vendor sends you a refund check for a bill that is already paid

Record a Deposit of the vendor check:

1. Navigate to the Banking menu, then choose Make Deposits.
2. If the Payments to Deposit window appears, press OK.
3. Select the Received from the dropdown under the Make Deposits window and then click on the vendor who sent you the refund.
4. From the From Account dropdown, select the appropriate Accounts Payable Account.
5. Type the actual amount of the Vendor check in the Amount column.
6. Then, enter a memo, check number, payment method, and class (Optional).
7. Press the Save & Close tabs.

Record a Bill Credit for the refunded amount:

1. Select Enter Bills from the Vendors menu.
2. Press the Credit radio button to account for the return of goods.
3. Type the Vendor name.
4. Hit the Expenses tab and then enter the Accounts on the original bill.
5. Under the Amount column, write down the appropriate amount for each Account (the amounts may have to be prorated).
6. Press Save and Close.

Link the deposit to the Bill Credit:

1. From the Vendors menu, choose Pay Bills.
2. Review the Deposit that matches the Vendor check amount.
3. Select Set Credits and apply the Bill Credit you created earlier, then hit the Done tab.
4. Then, choose Pay Selected Bills, then click Done.

Scenario 2: The vendor sends you a refund check for returned inventory items

Record a Deposit of the vendor check:

1. Navigate to the Banking menu and then choose Make Deposits.
2. Press OK if the Payments to Deposit window appears.  
3. Under the Make Deposits window, select Received from the dropdown and then click on the vendor who sent you the refund.
4. Choose the appropriate Accounts Payable Account from the From Account dropdown menu. 
5. In the Amount column, enter the actual amount of the Vendor check.
6. Type the remaining information in the Deposit section. 
7. Press Save & Close.

Record a Bill Credit for the returned items:

1. Hover over the Vendors menu, then choose Enter Bills.
2. Press the Credit radio button to account for the return of goods.
3. Type the Vendor name.
4. Hit the Items Tab.
5. Enter the returned items with the same amounts as the refund check.
6. Click on Save & Close.

Link the deposit to the Bill Credit:

1. Go to the Vendors menu, and then click on Pay Bills.
2. Review the Deposit that matches the Vendor check amount.
3. Select Set Credits and apply the Bill Credit you created earlier, then press Done.
4. Choose Pay Selected Bills, then hit the Done tab.

Scenario 3: The vendor sends a refund check not related to an existing bill

A refund check is not related to an existing bill, such as rebates, reward incentives, refunds, reimbursements, or checks issued by a vendor to cash out an existing credit.

Record a Deposit of the vendor check:

1. Move to the Banking menu and then choose Make Deposits.
2. Click OK if the Payments to Deposit window appears.
3. From the Make Deposits window, select the Received from dropdown and then opt for the vendor who sent you the refund.
4. Choose the appropriate Accounts Payable Account in the From Account dropdown menu. 
5. Under the Amount column, type the actual amount of the Vendor check.
6. Enter the remaining information in the Deposit.
7. Press the Save & Close tabs.

Record a Bill Credit for the amount of the Vendor Check:

1. Navigate to the Vendors menu and then choose Enter Bills.
2. Press the Credit radio button to account for the return of goods.
3. Type the Vendor name.
4. After this, hit the Expenses tab and then enter the Accounts you would normally use for refunds. 

Note: Intuit recommends you to contact your accounting professional if you’re unsure about which account to be selected. 

5. Under the Amount column, write down the appropriate amount for each Account (the amounts may have to be prorated.)
6. Press the Save & Close buttons.

Link the Deposit to the Bill Credit:

1. Move to the Vendors menu, then click on Pay Bills.
2. Check the Deposit that matches the Vendor check amount.
3. After this, choose Set Credits and apply the Bill Credit you created earlier, then hit the Done tab.
4. Select Pay Selected Bills, then press Done.

Scenario 4: A vendor sends a refund check on behalf of the original vendor

Create a deposit for the vendor who sent the refund check:

1. Hover over the Banking menu and then choose Make Deposits.
2. If the Payments to Deposit window appears, press OK.
3. Select the Received from the dropdown menu in the Make Deposits window and then opt for the vendor who sent you the refund.
4. Choose the appropriate Accounts Payable Account under the From Account dropdown menu.
5. In the Amount column, type the actual amount of the refund.
6. Enter a memo, check number, payment method, and class (this is optional).
7. Hit the Save & Close icons.

Create a Bill for the Amount of the Deposit and apply it to the Deposit:

1. Navigate to the Vendors menu and then select Enter Bills.
2. From the Vendor field, choose the vendor who sent the refund.
3. Enter the amount of the refund in the Amount Due field.
4. Hit the Expense tab.
5. Under the Account field, select a Wash account. (Example would be an expense account).
6. Type the amount of the refund in the Amount field.
7. Press Save & Close.
8. Go to the Vendors menu and then choose Pay Bills.
9. Select the Bill and then click on Set Credit.
10. Hit the Credit option and press Done.
11. Choose Pay Selected Bills, then hit the Done tab.

Create a Credit for the Original Vendor:

1. Move to the Vendors menu and then choose Enter Bills.
2. Press the Credit radio button.
3. Select the vendor who sent the refund from the Vendor field.
4. Type the amount of the refund under the Credit Amount field.
5. Hit the Expense tab.
6. Under the Account field, click on the Account used on the original Bill.
7. Enter the amount of the refund in the Amount field.
8. Click Save & Close.

Create a Bill for the Amount of the Credit affecting the Wash Account and apply the Bill to the Credit:

1. Move to the Vendors menu and then select Enter Bills.
2. Under the Vendor field, click on the vendor who sent the refund.
3. Type the amount of the refund in the Amount field.
4. Hit the Expense tab.
5. From the Account field, choose a Wash account. (Example would be an expense account).
6. Enter the amount of the refund in the Amount field.
7. Press Save & Close.
8. Go to the Vendors menu and then choose Pay Bills.
9. Select the Bill and then click Set Credit.
10. Hit the Credit option and then press Done.
11. Choose to Pay Selected Bills, then hit the Done tab.

Scenario 5: The vendor sends you the refund as a credit card credit

1. Navigate to the Banking menu and then choose Enter Credit Card Charges.
2. From the Credit Card dropdown menu, select the credit card account.
3. Press the Refund/Credit radio button.
4. Choose the appropriate Vendor name and type the Date, Ref No, and Amount.
5. Write down an appropriate memo to describe the transaction.
6. If you returned Items, hit the Item tab and then enter the Items and Amounts from the refund.
7. However, if the refund does not have Items, click on the Expenses tab, select the appropriate Accounts, and enter the Amount.
8. Hit the Save & Close icons.

Steps to Enter Credit Card Refund in QuickBooks Online

Did you get the credit card refund for a business expense? Here’s how to record it. 

If you enter expenses or write a checks

Follow these steps if you don’t enter bills to track your expenses.

1. Make sure you have already created the initial expense or check in QuickBooks and assigned a Category/Account to it.
2. Click + New and then Bank Deposit.
3. Navigate to the Add funds to this deposit section:
   • Type the amount refunded by the vendor and then select the Category/Account that you selected on the initial expense or check.
   • Choose the Track returns for customer checkbox and then select the customer or project if this refund was for an expense that you linked to a customer or project. This way, your costs will not be overstated.
4. If you deposited customer payments for invoices into the bank account along with the vendor refund, add them under the Select the payments included in this deposit section.

If you enter bills you plan to pay later 

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

Step 1: Create a Vendor Credit

1. Click + New.
2. Select Vendor credit.
3. From the Vendor dropdown menu, choose your vendor.
4. After this, type the Category details or Item details depending on how you record purchases with this vendor. Usually, this is the category, product, or service you’re getting a credit for. 

Note: QuickBooks will put it back into inventory if you select an inventory item. However, if the item is defective or if you don’t want it added back to the inventory, you can make an inventory adjustment.

5. Press the Save and Close tabs. 

Step 2: Apply Vendor Credits to a Bill

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

1. Click + New.
2. Select Pay bills.
3. After this, choose a bill for your vendor from the list. Then, you’ll see the available credit with this vendor under the Credit Applied field.
4. Fill out the rest of the fields like you normally do.

Deposit a Vendor Credit When No Expense has Occurred 

Sometimes a vendor may give you credit with them as a promotion or a thank you. Here’s how to record the credit and apply it toward any open or future bill with them.

Step 1: Enter a Vendor Credit

This makes sure the credit hits the expense account you use for this vendor. 

1. Select + New.
2. Click on Vendor credit.
3. From the Vendor dropdown menu, choose your vendor. 
4. Enter the Category details or Item details based on how you record purchases with this vendor. This is the category, product, or service you’re getting a credit for.
5. Hit the Save and Close icons. 

Step 2: Deposit the money you got from the Vendor

1. Click + New.
2. Select Bank deposit.
3. Choose the Account where you got the refund under the Account dropdown menu.
4. Under the Add funds to this deposit section, fill out the following fields:
   • Received from: Select the vendor who gave you a refund.
   • Account: Click on Accounts Payable. 

Important: You need to pick Accounts Payable so you can tie the refund to the vendor credit.

• Payment method: Enter the method your vendor used to refund you.
• Amount: Type the amount of your refund.

5. Press the Save and Close tabs.

Step 3: Use Pay Bills to connect the bank deposit to the Vendor Credit

You can use Pay Bills to keep your vendor expenses accurate. Follow these steps:

1. Click + New.
2. Select Pay bills.
3. After this, choose the bank deposit you just created. You’ll see the amount of the vendor credit in the Credit Applied field. The Total payment should be US $0.00.
4. Hit the Save and Close tabs. 

Record Vendor Refunds on a Credit Card 

1. Click + New.
2. Select Credit card credit.
3. Under the Payee field, choose the appropriate vendor.
4. Click on the credit card where you received the refund to in the Bank/Credit account dropdown menu.
5. After this, enter the Payment date, refund Amount, Tax, and Category.

Note: The category used here is the original expense account on the original bill.

6. Press the Save and Close tabs.

Steps to Enter Credit Card Refunds in QuickBooks Desktop for Mac

Entering credit card refunds in QuickBooks Desktop for Mac so you can seamlessly reconcile your Account. You don’t need to enter a negative amount when entering credit card charges. Instead, you can use the Credit option to record the refund. For this, follow the steps below:

1. Navigate to the Vendor menu and then click on Bills.
2. Toggle the Credit option at the top of the window.
3. Type all the necessary information.
4. Press OK to save.

Bottom Line!

Entering a credit card refund in QuickBooks ensures that your financial records remain accurate and balanced. You can offset the original expense and reflect the refund in your credit card account by selecting the vendor, Account, and expense details, and by saving the transaction accurately. This maintains the integrity of your accounting data and helps you to avoid penalties or charges on the outstanding bill amount. 

FAQs:

How do I enter a credit refund in QuickBooks?

Step 1: Create a Credit Memo

1. Go to the Customers menu, select Create Credit Memos/Refunds.
2. Choose the customer from the Customerdropdown.
3. Add the items being credited and click Save & Close.

Option 2: Give a Refund

1. The refund check is automatically generated.
2. Go to Receive Payments under the Customers menu.
3. Select the customer and click the Discounts and Credits icon.
4. Link the refund check and confirm.
5. Finish by selecting Save & Close.

How do I Enter a Supplier Refund in QuickBooks?

Step 1: Record the Supplier Refund

1. Go to + New.
2. Choose Bank Deposit.
3. In the Account dropdown, pick the bank account where the refund was received.
4. In the Add funds to this deposit section:
   • Received From: Select the supplier who issued the refund.
   • Account: Choose Creditors.
   • Enter the refund amount.
5. Click Save and Close.

Step 2: Match the Refund with Supplier Credit

1. Go to + New.
2. Select Cheque.
3. In the Payee dropdown, pick the supplier.
4. Look for the Deposit and Credit in the list, then click Add.
5. Click Save and Close.

This method ensures your supplier refunds are properly tracked and matched to the right credits in QuickBooks!