How to issue a refund in QuickBooks

Pick the method that fits the refund. A refund receipt is for individual products or services the customer returned. Intuit points to the paid invoice method for cases such as a lost package, or where the refund needs to go through the Accounts Receivable (A/R) account.

Have ready the customer's preferred payment method and the bank account the refund is paid from. For a refund receipt you also need the product or service item being refunded set up in QuickBooks. For the paid invoice method, have the original invoice to hand.

If the money is going back because the customer paid too much, the how-to on applying an overpayment explains where that extra sits first.

1. Go to Home, select + New (or + Create), then choose Refund receipt.
2. From the Customer dropdown, choose the customer you're refunding.
3. From the Payment method dropdown, choose how the money goes back to them.
4. From the Refund From dropdown, choose the bank account the customer's payment was deposited into.
5. In the Product/Service column, add each product or service the customer returned.
6. For each line, fill in details such as the service date, description, quantity, rate and amount, using the same line details as the original sale.
7. If you'd like a copy for your records, select Print or Preview, then Print or Preview again.
8. Select Save and close.

For a paid invoice, Intuit's method has three parts. First, select + New (or + Create), choose Adjustment note and pick the customer. Enter the date, product or service and amount, using the same line details as the invoice, and select Save and close.

Second, record the money going out: select + New (or + Create) and choose Expense. Pick the customer as the Payee and the bank account the refund comes from as the Payment account. Intuit's method puts Accounts Receivable (A/R) in the Category column. Enter the refund total in the Amount field and select Save.

Third, link the two. Open Receive payment from + New (or + Create), choose the same customer, and fill in Payment method and Deposit To. Tick the expense under Outstanding Transactions and the adjustment note under Credits, if they aren't ticked already. The balance should come to zero, because the note and the expense cancel out. Select Save and close.

Saving a refund receipt updates your records straight away. The refund appears in the bank account you chose in Refund From, and the quantities of the products and services refunded change to show the return.

With the paid invoice method, linking the expense to the adjustment note shows the note as paid on the customer's account, and the expense holds the record of the refund. Intuit says your accounts receivable and bank account balances then come out right.

Refunding an inventory item through an adjustment note adds it back to your inventory. If the item is faulty or you don't want it back in stock, Intuit says you'll need to make an inventory adjustment.

If you use online banking, go to Bank transactions once the refund shows in your bank feed, and match it to the record you made.

Can't find Accounts Receivable (A/R) in the Category dropdown? If this is the first time you've added a payment to accounts receivable, select + Add new and add it there. And if the balance in Receive payment isn't zero, check that both the expense and the adjustment note are ticked.