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Posted June 08, 2019
Refunding Customer Payment Shortcut
If you do not need to print a check to the customer for the refund, then you can use this shortcut instead of the full Refunding Customer process.  Example:  You refund back to the customer’s credit card or bank account through a payment processor.

1. Recording Customer Credit to acknowledge a credit balance. 
    - This Customer Credit credits AR and Debit “Refund Allowance”  Note:  “Refund Allowance” is a contra revenue account.  Note:  Whether you specify the original Revenue account of the Refund Allowance account is based on your accounting practices.
    - This Credit is used to establish a balance to refund.  Note: If you already have a Customer Receipt with the unallocated amount to refund, then do not create a separate Credit.  Note: Voiding an invoice reverses both AR and Revenue for the invoice, and any associated receipts become unallocated.  In this case, do not create a separate credit.

2. Recording Refund Customer Invoice to offset the credit balance
    - The Customer Invoice debits AR and Credit Cash

3. Allocating Customer Credit from step 1 to Refund Customer Invoice from step 2.

In this case, there are no changes to Accounts Payable, and you do not reference the “Refunds Payable” liability account.

Cash AR Revenue
Initial Customer Invoice +AR +Revenue
Initial Customer Receipt +Cash -AR
Refund - Customer Credit -AR -Revenue (or Refund Allowance)
Refund - Customer Invoice -Cash +AR
Total 0 0 0
Update

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1 min read · Updated April 26, 2026

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