How to handle a refund to a customer for merchandise not received?

Refund to a customer for PAID merchandise not received?

  • Select “Refund Receipt” as one step process to refund a customer
  • Create + sign > Customers > Refund Receipt
  • Select Customer
  • Select Payment method
  • Select “Refund From” = Bank account if refund by Check (choose Undeposited Funds account if refunded by credit card that will show up in a batch deposit process)

Refund to a customer for UNPAID (OUTSTANDING) merchandise not received?

  • Select “Credit Memo” to reverse Sales Invoice
  • Create + sign > Customers > Credit Memo

Both entries (Refund Receipt and Credit Memo) will also reverse or add back quantity sold to inventory. Inventory is overstated. It needs adjustment.

How to adjust Inventory?

From the company gear (upper right corner) > Lists > Products and Services > Choose Product that need Inventory adjustment > New Product or Service Information screen will open > Select UPDATE button > Enter “New Quantity On Hand” (it will automatically show difference as well) > Save

What will this entry do to Inventory now?

It will reduce “Inventory Asset” account (credit) and will post to Shrinkage account debit side entry. That’s your loss portion from the cost side.

Since “Shrinkage” is a default account, you can leave it as it is or reclassify to COGS or any appropriate account as needed. You will need to write a Journal Entry to do this reclass.

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