How to Record a Vendor Credit in QuickBooks Online?

The transaction to record the vendor credit in QuickBooks is required when you return items to the vendor. For this […]

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The transaction to record the vendor credit in QuickBooks is required when you return items to the vendor. For this type of transaction, you have to enter a vendor credit to record your returns or refunds to the vendor. In case of a return, if the vendor sent you the credit document then it clearly says that you no longer owe any amount to the vendor. If the vendor is not able to send a credit document then they send you or issue a refund check for that refunded item. Learn How to Record a Vendor Credit in QuickBooks Online.

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In both cases, whether the vendor issues you a refund check or a credit document you have to enter a vendor credit into your QuickBooks account. After that, when you pay the vendor’s bill then you have to apply to your books.

In case of a refund cheque, you also have to enter one more thing into your book that is to enter a deposit and then link it to the refund check that you have entered before.

What are Vendor Credits in QuickBooks?

In QuickBooks Online, Vendor credit is used to track returns to suppliers or refunds from vendors (refund checks). Vendor credits are the same as the sum that you owe a vendor. Vendor credits give you the ability to monitor this outstanding sum up until the vendor pays it, issues a refund, or deducts it from other invoices in his books of accounts.

Create Vendor Credit in QuickBooks

In QuickBooks, an account payable transaction is used to track the money you owe your suppliers for goods or services you have purchased. Another name for it is a bill. Vendor credit is what you receive if you return a product or request a service credit.

Please do not confuse vendor credit with credit notes.

The QuickBooks expense account you are using for this vendor has been updated with the credit amount thanks to the Plan to Pay Later feature.

Enter Vendor Credits and Refunds in QuickBooks Online

How you record your purchases will determine how to enter the refund.

If You Enter Expenses or Write Checks

If you don’t enter bills to track your expenses then you can follow these steps:

  • Start by ensuring that you have already created the initial expense or check in QuickBooks and assigned a Category/Account to it.
  • Then you have to select +New and then Bank Deposit.
  • Now you have to go to the Add funds to this deposit section:
    • You have to enter the amount that is refunded by the vendor and then you have to choose the Category/Account that you have selected on the initial expense or check.
    • You have to select the Track returns for customers if this refund was for an expense that you have linked to a customer or project, then you have to choose the project or customers. In that way, your costs will not be overstated.
  • Along with the vendor refund if you deposited customer payments for invoices into the bank account then you have to add them in the Select the payments that are included in this deposit section

If You Enter Bills you Plan to Pay Later

If you enter bills to track your expenses use these steps. By doing this, you ensure that the credit is applied to the expense account you use for this vendor.

Step 1: Create a Vendor Credit

  • First, You have to select +New
  • Then you have to select Vendor credit or Receive vendor credit.
  • Select your vendor in the Vendor dropdown menu.
  • Now you have to enter the Category details or Item details depending on how you record purchases with this vendor. Basically, this is the category, product, or service you are getting credit for.
  • Then you have to select Save and Close.

Step 2: Apply Vendors Credits to Bill

Toward an open or future bill, you can apply for vendor credit. When you are ready to use the credit, follow the below steps to do it:

  • Select +New firstly.
  • Then you have to select Pay Bills or Pay Bills.
  • Now you have to choose a bill for your vendor from the list. In the Credit Applied field, you will see the available credit with this vendor.
  • At last, you have to complete the rest of the fields that you normally do.

Deposit a Vendor Credit When no Expense has occurred

A vendor may frequently give you credit beside them as a form of appreciation or marketing. See how to record the credit and apply it to any outstanding or upcoming debt with them in the steps below.

Step 1: Enter a Vendor Credit

This guarantees that the credit is applied to the expense account you use for this vendor.

  • First, you have to select New.
  • Then you have to select Vendor credit or Receive vendor credit.
  • Select your vendor in the dropdown menu.
  • Enter either the Category data or the Item details, depending on how you track your purchases from this merchant. This is usually the category, item, or service for which you are receiving credit.
  • At last, then you have to select Save and then close.

Step 2: Deposit the Money you Got From the Vendor

  • Begin by clicking on New.
  • Then you have to select Bank deposit.
  • Now you have to select the account where you got the refund in the dropdown menu.
  • You have to fill out the following fields in the Add funds to this deposit section:
    • Received from: Decide which vendor issued you a refund.
    • Choose Accounts Payable under Account. You must select Accounts Payable in order to link the refund to the vendor credit. Although it may seem a little strange, this is the best course of action.
    • Payment method: Type in the refund method your vendor used to pay you.
    • Amount: Enter the size of your refund here.

Step 3: Use Pay Bills to Connect the Bank Deposit to the Vendor Credit

This is the appropriate thing to do even when you aren’t paying a bill. Maintaining accuracy in your vendor expenses is the last step.

  • Choose + New and then choose Pay Bills.
  • Then you have to select the bank deposit that you just made. The Credit Applied field contains the vendor credit amount. The total amount due is $0.00 USD.
  • Select Save and then close.

Record Vendor Refunds on a Credit Card

  • Begin by selecting New and then you have to select Credit card credit.
  • Then you have to select the appropriate vendor in the Payee field.
  • Select the credit card where you received the refund from the Bank/Credit account dropdown menu.
  • Then you have to enter the Payment date, refund Amount, Tax, and Category.
  • Lastly, Select Save and close.

What are the Steps to Record a Vendor Credit in QuickBooks Online?

Steps to enter the vendor credit are as follows:

  • In QuickBooks Online, click on the Create that is shown in the form of + sign.
  • From the drop-down option of create button, click on the Vendor Credit.
  • The window of Vendor Credit opens up.
  • Choose the Vendor who issues you the credit.
  • Mention the Date for the credit given by the vendor.
  • Enter the Amount in the credit amount field.
  • Go to the Account Details section.
  • Now click on the amount that is used on the original bill.
    • In case you received the credit; when you return the items to the vendor.
  • Then choose the items in the Item Details section that you returned.
  • Now you have to scroll down and then attach an electronic copy of your credit to the transaction of vendor credit.
  • Click on the button Save and Close if you don’t want to add any other thing to the list. Click on Save and New button if you want to add anything else to the list.If you enter expenses or write checks

What are the steps to Enter the Deposit for the Refund Check?

You have to process these steps when the vendor sends you the refund check. So to enter this refunded check into a deposit and link it to vendor credit; follow the steps below:

  • Click on the Create icon that is + sign.
  • Now from the create menu options at shown to you.
  • Select the Bank Deposits option.
  • The deposit transaction window opens up on your screen.
  • Now go to the Deposits Section then provide the information that is required.
  • Choose the Vendor who issued the cheque into the received column.
  • Then select the Accounts Payable account in the Account column.
  • Now mention the Amount of the check the amount column.
  • Click on Save and Close button to save this transaction and then close the window.
  • Again, click on the Create button that is + sign.
  • Choose option Expenses from the drop-down menu of create button.
  • The expense window opens up.
  • Select the Vendor from whom you get the refund cheque that you are depositing.
  • In outstanding Vendor Credit, click on the Add button.
  • Then click the Add option in the deposit.
  • After adding the transaction, the QuickBooks account that creates the bill payment transaction with the net value of zero that also applies dedicated to the deposit.
  • Then click on the Save and Close option if you don’t want to add any other transactions.
  • But if you want to add any other transactions then you have to click on Save and New button.

How to Pay Vendors in QuickBooks Online

When you pay a vendor in QuickBooks Online, a bill is automatically prepared in the background, synced back to QuickBooks Online, and the payment is started. According to QuickBooks Online:

  • You have to select the Bill to Pay online widget on the dashboard.
  • Then you have to select the Make a Payment tab.
  • Now you have to enter the payment information for the vendor, including
    • Amount
    • Vendor name
    • Memo
    • Bill no.
    • Payment account
    • Description
    • Class
    • Customer
    • Account
  • Then you have to select Choose delivery method and then you have to choose Bank transfer or Check.
  • If needed for check, you have to select a process date and edit vendor information.

In this article, you get to know the procedure to record vendor credit in QuickBooks Online using the above procedure. The process is explained in detail so that you can easily process it without any problem. In case you have any issues then the Dancing Numbers expert team is available via LIVE CHAT.

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Frequently Asked Questions (Faqs)

How to Link Deposits to the Bill Credits by the Vendor after Recording the Vendor Credits in QuickBooks Online?

check-green In QuickBooks Online, go to the Vendor’s menu.
check-green Click on the Pay Bills.
check-green Then select the deposits that you made and they match the vendor check amount.
check-green Click on the Set Credits.
check-green After that, Apply the Bill Credit that you have created before.
check-green Hit on the Done button.
check-green Click on Pay Selected Bills.
check-green Then click the Done button when you are done linking it.

What do you mean by a Journal entry for a Vendor Credit to Record a Vendor Credit in QuickBooks?

The journal entry is done debit to your supplier’s account that decreases your liability. After that, you have to credit the purchase return account which also decreases your expenses.

What do you mean by Vendor Credit in the Record of a Vendor Credit in QuickBooks Online?

The vendor credit is a financial transaction that reduces the amount owed to the vendor for your future bill. In other words, when you do a return or refund the item; you receive a credit document or credit note for that amount and you are not liable to pay it and get the amount refunded.

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