Refund of prepayment


I made a prepayment to a vendor and recorded it. However, the vendor has now refunded the amount back to us. I'm not sure how to account for it at the moment, but the refunded amount has been deposited into our bank.

any guidance? 

  • +1
    verified answer

    I would use the Purchase as though you are entering a vendor invoice. Instead of using an expense account use the bank account where you deposited the funds. Before posting check your Reports (Ctrl+J) to be certain the entry is debiting the bank and crediting the A/P.

    After posting go into the Payments for the same vendor where there should be both a positive and a negative number of the same amount. Check both to record a Zero payment. Be sure to change Paid by to Cash so that you do not use a cheque number unnecessarily.

    Hope this helps