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Managing Customer Overpayments in QuickBooks

How to Hanlde a Customer Overpayment in QuickBooks

A reader wrote to ask what to do when a customer sent a check for $250.00, but the invoice was for $230.00. He said he didn't want to return the customer's check and wait for another check to arrive; instead he wanted to issue a refund check after he deposited the payment. He knows that QuickBooks offers the option to create a refund when you enter a customer payment that's larger than the balance due, but he wants to understand what goes on "behind the scenes when the transactions are posted".

When you enter the amount of the payment at the top of the Receive Payments transaction window (in this case $250.00) and select the invoice for $230.00, QuickBooks posts the entire transaction as follows: Debits the bank for $250.00 and credits Accounts Receivable for $250.00.

When you select the option to send the customer a refund and create the check for $20.00, QuickBooks credits the bank and debits Accounts Receivable. The $20.00 debit to A/R "washes" the $20.00 that was posted along with the $230.00 (correct) posting.

If you had opted to give the customer a credit instead of sending a check, QuickBooks would not have "washed" the A/R (keeping it there for the credit); instead the debit side of the transaction should post to the income account you used when you created the invoice.

 

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