what if your customer wants a refund for an invoice that's already paid if you have any
questions about this topic you can leave them in the comment section below and I'll do my
best to help you and of course if you feel the video helped you I hope you will click like and
don't forget to subscribe to get updates on new videos that come out all the time refunding a paid
invoice requires several steps now some of you might think that you might be able to just make
a refund receipt like we did in our first video well you cannot and that's because you will not
have a record of the refund in the customers account and on the customers reports first you
must make a credit memo just like we did in the previous video then we use the write checks window
to pay the amount of the credit memo and then in order to finish we use the receive payment window
to apply the check to the credit memo exactly the way we did in the previous video when we applied
a credit memo to an invoice now we all remember on the original invoice the income went up and
accounts receivable and the customer records went up at the moment we made the invoice so
in step one when you make a credit memo we know that the income that related to that invoice is
going to go down and the customers balance will go down in the customer records then for step
two when we write the refund check we know that cash goes down because we're writing a check but
accounts receivable actually goes up because it would normally decrease when you get money
from a customer so there Fork accounts receivable increases because you are paying to a customer and
that will be the effect after step two step three we simply apply the credit memo that decreased
the customers balance to the refund check that increased the customers balance and then they'll
cancel each other out and the customers balance will be correct so writing a refund check for a
paid invoice is literally as easy as one two three for example let's imagine on March 23rd we granted
Betty's request for a refund for the January 2nd invoice which is invoice number 2 and I happen to
remember that's $1400 well after we do step 1 the accounts receivable and the customer records for
Betty will decrease it will be a negative number almost as if we owe her money for this but again
it's only after step 1 but most importantly the related income account will go down and I happen
to remember that invoice number 2 had 10 editing hours so editing income will decrease for 1,400
and accounts receivable will decrease for 1400 as well as Betty's balance let's take a look at
how to record it now here we are at the open invoice report and you can see invoice number
2 has already been paid in order to make the credit memo we click the plus sign go over to
credit memo in the left column just like we did in the previous video and we know that in our little
story this event happened on March 23rd of 2017 and it was for customer Betty and just like on
the invoice it was editing hours 10 okay making $1400 just like we did in the previous video and
when we click Save & close we can take a look at the reports specifically the trial balance and
you can see that accounts receivable has decreased if we scroll to the very bottom you can see March
23rd we have a credit memo and it's actually - 1400 bringing the balance of accounts receivable
down okay cuz we're in the accounts receivable account right now if we go back to the trial
balance you can also see that this also affected editing income if we come over to editing income
and we click here you can see at the bottom of editing income from March 23rd we have this credit
memo that lowered the balance of editing income but more importantly in the open invoice report
you can see that we just made a credit memo that is on the open invoice report because it means it
has not yet been applied to any invoice and it has not yet been refunded now in step two we're going
to write a refund check for that credit memo and accounts receivable will actually increase
and again this is because accounts receivable would normally decrease when we get money from
a customer so therefore when we pay money to a customer accounts receivable temporarily goes
up and of course cash and bank goes down because we're writing a check to the customer now when we
write the check we use the accounts receivable account as the account that we're paying to and
we put the customer name in the job field watch carefully how we do it we simply click the plus
sign and we go to the vendor column and go down to where it says check now of course it's going
to be to the same customer Betty and the check is coming from the cash and bank account and the date
of that we pay the refund check should be the same date as the credit memo now what account do we put
well in this case we're paying a check to accounts receivable you would not put the income account
because the income account already decreased when we made the credit memo you're putting accounts
receivable to counter the effect of the credit memo to the specific customer whom we made the
credit memo for so in the customer field in the bottom right not just the payee it also has to
be in the customer field in the bottom right you put Betty Boop and the amount is $1400 the exact
amount of the credit memo and now we will click Save and close and check the result when we look
at the open invoice report we see that both the credit memo and the check are both on open invoice
because neither of these have been applied so this check increased the customers balance and
this credit memo decreased the customers balance and now we're ready for step 3 step 3 we're going
to apply the check to the credit memo and have the two of them cancel each other out that means
we make a zero dollar payment and of course we use the same date that we used for both the check
and the credit memo we click the plus sign and we come over and we click receive payment because we
learned in the previous video that's the window to use now we put Betty Boop and we can see for
Betty that she has the check making her balance go up and the credit making the balance go down
you have to click the box in the left margin for check first so then the credit memo box in
the left margin will be available then click that now notice you have both the $1400 written check
and the $1400 credit memo checked off on the left but when you scroll up the amount you received on
March 23rd is zero now when you click Save and close or save and new and now when you go back
to the original open invoice report you see that both the refund check and the credit memo have
disappeared they canceled each other out and there is no effect on the customers current balance