How do I refund a credit to a customer?

We receive retainers on some jobs. I just enter them by "Receive Payment" and it shows as a credit on that job. When the job is completed if there is still a credit then I return it by writing a check to the client (job) and apply it to the Accounts Receivable account. I then to go the customer (job) and receive payment and apply the discount/credit for the check written. This process is subtracting from my AR balance on my Chart of Accounts page. Not sure if I should just be applying to a different account rather than AR? This is a process I have been following that I found on Quickbooks help. 


"This process is subtracting from my AR balance on my Chart of Accounts page."

Of course it is. Let's review the issues here:

Using Receive Payment without any open invoices is creating negative AR. It reduces and obscures your real AR balance and it is a Backwards AR entry. You would use Sales Receipt. Set up an Other Charge Type item and link it to the account that matches your accounting requirements for this activity:

A Cash Basis entity gets Income when someone prepays.

An Accrual Basis entity or an entity required to keep this as Trust Funds, has a Liability event.

Later, you apply it to the actual invoice, refund it, or a combination of this, using that same prepayment item on a Credit Memo.

The process you have been doing is not really appropriate for anyone's accounting needs.

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