Credits

Manage vendor credits and refunds

Vendor credits represent money a supplier owes you. They can result from overpayments, returned goods, or refunds. In QuickBooks Online, you can enter these credits, apply them to open bills, or link them to refund deposits.

Enter a vendor credit

If a vendor owes you money for returned items or a billing error, enter a vendor credit to record the liability.

1. Select the + New button.
2. Choose Vendor Credit.
3. In the Vendor dropdown, select the supplier.
4. Enter the date and the relevant details (items or account details).
5. Select Save and close.

Apply a credit to a bill

Once you have entered a credit, you can apply it to an outstanding bill to reduce the amount you owe.

1. Select the + New button.
2. Choose Pay Bills.
3. Select the specific bill you want to pay.
4. In the Credit Applied column, enter the amount of the credit you want to use.
   • Alternatively, check the box for the specific credit in the Credits section to apply it automatically.
5. Select Save.

Delete or unapply a credit

If you applied a credit in error, the method for removing it depends on how the credit was created.

To delete an unused credit

1. Select the + New button.
2. Choose Pay Bills.
3. Locate the blue credit amount in the Credits section.
4. Select the credit amount to open it.
5. In the bottom corner, select More.
6. Choose Delete.

To unapply a credit from a bill

• If the credit came from an overpayment: Open the original payment transaction and uncheck the bill to remove the link.
• If the credit came from a Credit Memo: You must delete the Credit Memo itself to remove the application.

Handle vendor refunds

If a vendor sends you a refund check, you should link it to the existing vendor credit to clear the balance.

1. Select the + New button.
2. Choose Bank Deposit.
3. In the Add funds to this deposit section, fill in the following details:
   • Received From: Select the vendor.
   • Account: Select Accounts Payable.
   • Payment Method: Select the method used (e.g., Check).
   • Ref: Enter a reference number (e.g., the check number).
   • Amount: Enter the refund amount.
4. Select Save and close.
5. Go to the + New menu and select Pay Bills.
6. Select the vendor. You will see the bill for the refund you just deposited and the open credit.
7. Check the boxes for both the bill and the credit.
   • The Credit Applied column should show the credit amount offsetting the bill.
8. Select Save.

Use credits for warranty claims

If you perform warranty work where a manufacturer reimburses you for parts and labor, you can track this using credits.

1. Create an invoice for the customer with a $0 total. Use a specific invoice numbering convention (like adding “-W”) to distinguish warranty repairs for auditing purposes.
2. When the manufacturer sends a statement credit for the labor and parts, enter it as a Vendor Credit.
3. Apply that credit to any outstanding bills you have with that manufacturer, or link it to a refund check as described above.

Accounting for credits (Journal Entries)

In accounting terms, a credit to an expense account reduces the expense. While QuickBooks Online handles vendor credits automatically through the forms above, you can also use journal entries if necessary.

• To credit an expense account, you would Debit Accounts Payable (or Cash) and Credit the specific Expense account.
• We recommend using the standard Vendor Credit feature whenever possible to ensure your Accounts Payable reports remain accurate.