If we return an office expense and are refunded, how do we categorize that refund transaction since it's not actual "income"?

Glad to have you here, plainvi3w.

Refunds are recorded differently depending on how the purchase is recorded. If you enter expenses or write checks, you can use the following steps below.

Here's how:

1. Click + New and then Bank Deposit.
2. Go to the Add funds to this deposit section:
   • Enter the amount refunded by the vendor and choose the Category/Account that you selected on the initial expense or check.
   • If this refund was for an expense that you linked to a customer or project, select the Track returns for customer checkbox, then select the customer or project. That way, your costs will not be overstated.
3. If you deposited customer payments for invoices into the bank account along with the vendor refund, add them in the Select the payments included in this deposit section.
4. Once done, hit Save and close.

These are the steps if you receive a credit for the returned item:

Create a vendor credit:

1. Click + New.
2. Select Vendor credit.
3. In the Vendor dropdown, select your vendor.
4. Depending on how you record purchases with this vendor, enter the Category details or Item details. Usually, this is the category, product, or service you’re getting credit for.
5. Once done, hit Save and close.

Deposit the money you got from the vendor:

1. Click + New.
2. Select Bank deposit.
3. In the Account dropdown menu, select the account where you got the refund.
4. In the Add funds to this deposit section, fill out the following fields:
   • Received from: Select the vendor who gave you a refund.
   • Account: Select Accounts Payable. 
   • Payment method: Enter the method your vendor used to refund you.
   • Amount: Enter the amount of your refund.
5. Once done, hit Save and close.

Lastly, link the deposit and vendor credit using the Pay Bills feature.

Here's how:

1. Click + New.
2. Select Pay bills.
3. Select the bank deposit you just created. You’ll see the amount of the vendor credit in the Credit Applied field. The Total payment should be US $0.00.
4. Once done, hit Save and close.

Refer to this link that contains all the instructions about this process: Enter vendor credits and refunds in QuickBooks Online.

If you need tips or related articles in the future, please visit our website: Help Articles page.

You're welcome to post again if you have further questions about the refund process. I'll be here to help you.