Applying payments to Invoice when we also have to issue a refund

Thanks for checking in with us,  BeachGirl19971.

We appreciate you making a journal entry to resolve this issue. Journal entries are only used as a last resort for recording transactions. They allow you to transfer funds between accounts and force your books to balance in certain ways. We can create credit memos or refund receipts for this transaction to issue a refund. If an invoice has been paid, follow these steps to issue a customer refund:

1. Click the + New Plus icon.
2. Select Credit memo.
3. In the Customer field, select the appropriate customer.
4. Enter the Credit Memo Date, Amount, Tax, and Product/Service you’re getting credit for.
5. Press Save and close.

Here is another method if you want to refund a sales receipt:

1. Click the + New Plus icon.
2. Choose between Refund receipt or Give refund.
3. Add the name of the customer you want to refund in the Customer dropdown.
4. In the Refund From dropdown, select the bank you deposited the payment for the invoice to. 
5. Add all products or services the customer returned in the Product/Service column.
6. Make sure to fill in the date, quantity, rate, amount, sales tax, and other fields accordingly.
7. Press Save and close.

Here is an article with videos to walk you through the refund process: Record a customer refund in QuickBooks Online. Feel free to visit our Sales and customers page for more insights about your company's income and customers.

Please come back here if you have other concerns about this refund topic or other questions about the features in QuickBooks. I'd be delighted to be of your assistance. Have a great day ahead.