Customer return merchandise and request cash refund. I generate check to customer by QB from AR and have the credit memo item post the refund. But I notice the AR account is positive and has accumulated all those amount that I refunded to Customers.
I would like to ask if I need to post a journal to credit "AR" and "debit "Refund Expense" for the amount that I refunded to customer after I finish the credit memo process?? Thank you so much!!
You start with the Credit memo, using an item that is the returned merchandise or a specific refund item instead. You don't use an item that is AR as the credit memo itself is AR.
You don't issue the refund payment yourself. You select that QB should generate the refund from this transaction, so the credit memo is linked to the refunded amount. Open the credit memo and use the History icon. Also, at the top there is an icon "I want to use this credit to..." create the refund.
You should not have both a credit and issued a refund. Issuing a refund clears the credit.
This is what I did. I start with Credit memo, find an item that is the return merchandise. Let QB generate the refund from the transaction. And at the top "I want to use this credit to" icon, I pick "use this credit to give refund". The bank is correct as it subtracts the refund amount.
But it doesn't seem right as the "Refund" expense account is empty. And somehow AR account has accumulated the amount that I refund to the customer. I just want to if it is correct for the accumulation of AR?? Or do I need to make a journal to credit "AR" and debit "Refund Expense" for the amount. Thanks!!
I should say my AR account is balanced (zero) and all the refund transactions has shown in this account. But the "refund" expense account doesn't show any of the refund transaction. So do I need to make the journal credit " AR" and debit "refund" expense account?? Sorry for the confusion and thanks!!
The refund account doesn't show any value if you used the actual, original, item for documenting the return. When this is returned inventory, the credit memo results in the item being back on hand and in stock again.
The Items control the flow of the data to the accounts. If it isn't inventory and if you want to see the Refund amount in a refund account, don't use the original item. The account linked to the original item now holds the refund. That sales account has a negative entry from your transaction. Open the credit memo and use Ctl+Y to see the data flow.
Read my first response again. The first sentence uses "or" to help clartify this issue.
Do you have a Refund "other charge" type of item linked to your refund account?
I have 3 different situations to refund to customer.
1. Full refund to customers and they return the item to me. (Now I understand this one through your explain, Thanks!!)
2. Partial refund to customer and they keep the item. Should I use "refunds and credits" to issue credit memo and use the actual and original item for documenting the refund?? or make a journal??
3. Shipping fee refund to customer. Should I also make a journal to document refund as credit "shipping fee income" and debit "refund".
Thank you so much for your time and you do help me a lot!!
Never use a journal entry for customer activity.
1. Yes.
2. Use only the Refund item on the credit memo. After all, they kept the item so the financial hit is to bank account only and your Refund item shows on Item-based reports.
3. You can use your Shipping item or the refund item or set up another refund item, linking to the same Refund account, but name this one Refund Shipping. Now you have Two different refund items and will see this with clarity on item-based reports, but the financial reports for Refund will simply show all refund $.
With a shipping refund item, you would see:
Shipping $45
Refund shipping -$25
for example.
Just want to say thank you so much!! You save my life!!
