Just create a manual AP Credit?

Hi Colleen Morrison I'm thinking there are likely several ways to handle this but perhaps the easiest is to just reverse the existing check in Bank Services, apply a partial credit note to the original invoice, adjusting it to the amount it should have been, then enter a new payment entry against the invoice for the new amount.  After banking the overpayment check from the supplier, reconcile the net difference in the Bank Rec as it will balance against the updated statement balance.  For example:

A/P Invoice - $1000

A/P Payment - $1000

Receive "Supplier Refund" check for $250.  Bank $250 Check.

Reverse A/P Payment in Bank Services (so now the A/P Invoice is unpaid).

Enter a $250 A/P Credit Note against the original invoice.

Enter an A/P Payment against the original invoice for $750.

Open the Bank Rec and ensure the Statement Balance incorporate the $250 supplier cheque.

Reconcile the $750 payment against the $1000 supplier payment and $250 supplier refund on the PDF Bank Statement.

For strict audit environments though, it may not pass muster as its not a perfect 1:1 transaction comparison against the transactions in Bank Services vs the actual bank.

Alternatively you could setup the Supplier as a Customer and enter the $250 supplier refund as an A/R Misc Receipt using the same G/L accounts proportionally.  This would give you a $250 deposit on the Bank rec to reconcile against the original $1000 payment.  However neither AP or AR alone would tell the full story.

A Bank Entry likely isn't going to help as you won't be able to record taxes against the deposit to "reverse the tax".

Good luck!...Post back if you want to discuss any ideas.