now we will learn how to record refunds that we give to customers a refund occurs when we
give money back to a customer for a return of merchandise or some kind of dissatisfaction from
a service we provided usually the original transaction that we had with the customer
is recorded on a sales receipt it would make sense that if the customer paid immediately upon
receiving a service we would issue a sales receipt and that's the reason why we give money back
rather than just reduce the customer's balance for example February 23rd we issued credit memo number
1 to Alan for 2 video hours from sale receipt number 12 we gave him check number 1 for $600
as a refund keep in mind this was a handwritten check now we know that two video hours is equal
to $600 so when we record this credit memo video income will decrease by $600 because it means we
really never earned that $600 if the customer is dissatisfied and wants his money back and of
course because we're paying him $600 cash and bank goes down by $600 what does this mean it means the
trial balance numbers will change as follows right now cash excuse me video income is 66 thousand six
hundred but as soon as we record this credit memo and refund video income decreases to 66 thousand
and because we paid the customer six hundred cash and bank will decrease by six hundred and become
eleven thousand four hundred from the main menu click customers create credit memo slash refund be
sure to collapse the ribbon and collapse the side panel the way you would with any other QuickBooks
document that you make the customer in this is Alan the day we are giving him the credit and
the refund is February 23rd the specific item that was on the original receipt that were giving him
a refund for is video and the quantity is 2 so we put the same item on the credit memo so the same
income account will go down for the credit now the credit number in this case is credit number 1 even
though QuickBooks thinks we already used number 1 when we made invoice number 1 we would like to
enumerate the credit memos differently so we will declare that this is credit memo number 1 when
we click Save and close we get a warning message that we already used number 1 we understand that
invoice number 1 exists but we would like to keep this number as credit memo number 1 when we click
keep number this window pops up it gives us a choice of what we want to do with this credit
do we want to decrease an existing invoice that this customer has not yet paid do we want to keep
it as a general credit and maybe pay him later or do we want to give him a refund right now let's
click give him a refund right now and then click OK when you click OK the issue a refund window
opens up all the information is already here and we're basically recording a check that we write
to this customer in order to put the check number into this window we have to remove the check mark
next to the to be printed command then this box will appear then we will put into this box the
check number of the check that we're giving the customer all the information about the refund
is already in this window when we click OK we look at the trial balance and we notice the numbers are
exactly what we expected cash in bank is 11,400 and video income has decreased to 66,000 even