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Ballentine
July 3, 2024
Question

Going a little crazy here: Please help in issuing a partial refund and recording it properly.

  • July 3, 2024
  • 1 reply
  • 0 views

I needed to refund a security deposit for a client who paid it along with the balance due. For simplicity, say the customer is XXX, the full payment was $500, which was deposited in account ZZZ, and the security deposit portion was $100. Here's what I have done:
1. I issued a $100 partial payment through the Merchant Center for XXX because I don't have her credit card details and thus, reversal is the only method I know to easily refund the money. I previously tried the refund through the payment record (All Sales), but that appears to be all or nothing; I'm not given an option there for a partial refund.
2. I created a journal entry allocating the $100 from A/R to Security Deposit (categorized as Other Current Liability).
3. I created a Refund Receipt from the bank account ZZZ where the full payment was deposited, and the payment method was one I created called "Reversal" and I just chose to be printed under the check number.
4. All of that seems to have worked, BUT the journal entry allocating the security deposit to Security Deposit now shows "Overdue." I've tried creating a Receive Payment entry for XXX of $100, which makes "Overdue" appear as "Paid", but it also adds an addition $100 to ZZZ, which isn't right either.
What should I do to avoid "Overdue" while keeping the balances as they should be.

I would very much appreciate a personal reply, rather than linking or copy/pasting from a tutorial. I have read every tutorial out there and used every AI chatbox to find the answer, and nothing has worked for me.

1 reply

JoesemM
JoesemM
July 3, 2024

I appreciate the detailed steps you've performed for the partial refund, Ballentine. When refunding a security deposit, you must first issue a check for the portion to be refunded and record an invoice for the remaining amount. Then, create a credit memo instead of a journal entry to correct the liability account and zero out the balance. Let me help share more details about it.

 

Since you issue a partial payment for the security deposit and post it to a liability account, you need to create a credit memo instead of a journal entry for the amount that is not being refunded.

 

To enter a credit memo for the un-refunded amount:

 

  1. Select + New.
  2. Under Customers, select Credit Memo.
  3. Select the item you created from the drop-down list in the Product/Service field.
  4. Enter the amount that is not being returned to the tenant in the Amount field.
  5. Select Save and Close.

 

Once the credit memo is created, the next step is to apply the credit to the invoice you created. To apply the credit to the invoice:

 

  1. Select + New.
  2. Under Customers, choose Receive Payment.
  3. Verify that the credit and invoice are both selected and that the amounts are equal.
  4. If you don't see the credit and the invoice, they have been automatically applied, and you can select Cancel to skip this part of the process.
  5. Select Save and Close.

 

Once done, it will show a zero balance. For more details on how to return a part of a security deposit, see this article: Refund a security deposit in QuickBooks Online.

 

Additionally, you can get more tips about accepting electronic customer payments and void transactions in QuickBooks Payments: 

 

 

Please let me know if you have follow-up questions while processing refunds to your customers. I'm just a few clicks away to help. Have a good one!

B
BallentineAuthor
July 3, 2024

Thank you for your reply. To clarify my circumstances:

 

Per #2: The journal entry was just to allocate the security deposit portion of the full payment to the liability account. I.e., It takes the payment and keeps $400 in A/R and designates $100 as liability (the Security Deposit account). I'm not saying that's correct, just that it's what I read to do to designate the $100 as something I had to refund at some point. Should I not even bother with that?

 

I tried the Credit Memo method (instead of Refund Receipt), and found I also had to enter a bank deposit of -$100 to show the removal of the security deposit from bank account ZZZ (where it was deposited). Applying the Receive Payment ended up with an extra entry in Security Deposit (if I remember right...I tried so many things). However, I had the initial journal entry there as before, so again, is that not something I should be doing and just keep the full payment as A/R and not try allocating to Security Deposit?

 

And While I have you, is there a way to streamline this through Quickbooks Online. I see a Refund option in the original payment, but in my tests with small payments ($3), it didn't give me an option to do a partial refund. Is that an option for larger amounts, like $100+? I only used Merchant Account, because I don't have access to credit card details and didn't know another way.

 

 

C
CharleneMaeF
July 3, 2024

Thanks for sharing additional clarification, Ballentine. I'm here to provide the steps to record the refund accurately.

 

The instructions shared by my colleague are applicable if you start the refunding process by issuing a check for the security deposit. You can follow the rest of the steps below to apply the credit memo and zero out the balance.

 

Here's how to create a check:

 

  1. Go to + New and then select Check.
  2. Enter the check information.
  3. In the Account details section, select the liability account you use for security deposits from the Account column dropdown list.
  4. Select Save and close.

 

Then, add a product or service item needed to create an invoice for the un-refunded part of the amount:

 

  1. Go to the Gear icon and then select Products and services.
  2. Select New.
  3. From the Product/Service information panel, select the appropriate type of item to create.
  4. Enter the product or service information for the item.
  5. Click Save and Close.

 

Once done, create an invoice for the un-refunded portion of the deposit:

 

  1. From + New, choose Invoice.
  2. Select the item you created.
  3. Enter the part of the deposit you're not returning in the Amount field.
  4. Hit Save and close.

 

After that, you can follow the steps shared by my colleague to complete the refund process. For more guidance, please see this article: Refund a security deposit in QuickBooks Online.

 

Please note that the steps above don't require creating a journal entry or refund receipt. If you prefer not to start over, I recommend consulting an accountant. They have the expertise to provide assistance and alternative options to help you properly record the refund without messing up your books. If you don't have one, I suggest using our Find QuickBooks Certified ProAdvisor tool to look for an expert near you.

 

Moreover, you can contact our QuickBooks Support Team to have someone guide you via phone or chat. They also have a secure screen-sharing tool to ensure everything is recorded accurately.

 

Finally, I suggest running and customizing your QuickBooks reports to track how your business is doing and focus on different aspects of your books (such as your sales, spending, and other parts).

 

Please know that you're always welcome to post here in this thread if you need additional assistance throughout the process. You can also share your other questions or concerns about creating sales entries and tracking refunds. I'm ready to help.

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