Credit Memo or Sales Return Entry in QuickBooks

Learn when and how to offer customers a credit memo or delayed credit.

Some customers would rather receive a credit they can use to lower the balance on their subsequent invoice than a refund.

In QuickBooks, credits can be handled in a few different ways. To instantly reduce a customer’s outstanding balance, you can create a credit memo. Alternately, you could enter a delayed credit so they could use it later.

Read on for more information on the distinctions and how to use them in customer transactions. 

Discover the differences between credit memos and delayed payments.

How to access Credit Memo / Sales Return Module in QuickBooks

You can give credit in QuickBooks by using a credit memo or a delayed credit. The main variations are as follows: 

Credit memo: 

• Use a credit memo if your customer wants to immediately lower their open balance.
• Your client may pay an invoice in full with a credit memo. They may utilize all or a portion of their credit memo.
• When recording payment for a customer’s invoice, you can apply a credit memo.
• Even if you don’t apply credit memos to invoices, they still have an impact on sales reports.

Delayed credit:

• Use a delayed credit if you want to keep track of a customer’s credit for potential future use and they don’t want it to immediately impact their open balance.
• Your client may use their overdue credit to pay off part of an invoice.
• Future invoices can include delayed credits as a line item.
• Delay credits, unlike credit memos, do not affect sales reports until they are applied to invoices.

Step 1: Create a credit memo, then apply it:

• Activate or deactivate in step 1 Implement credits automatically
• Select Account and settings from Settings by going there.
• On the Automation section’s menu, choose Edit.
• If you want credit memos for customers’ outstanding invoices or balances to be applied automatically, turn on Automatically apply credits. To select which open invoices to apply credit memos to, turn it off.
• Choose Save, followed by Done.

What occurs if the automatically apply credits setting is activated?

• Activate auto-apply credits if you want credits to be applied automatically to the oldest open invoices for the same customer. If it’s on, these things will occur:
• When you have open invoices dating back further, QuickBooks applies the credit to the oldest open invoice.
• Both the credit memo and the invoice will be marked as Closed if the credit matches the invoice’s total. The credit memo will be marked as closed and the invoice will be marked as partial if the credit is less than the total of the invoice.
• QuickBooks applies the remaining balance to the subsequent oldest open invoice if the credit exceeds the amount of the oldest open invoice. If there are no open invoices left, the credit memo’s status will read “Unapplied.”
• If you extend credit to a customer who has no debt, the customer will have a negative balance.

What occurs if the setting for automatically applying credits is disabled?

• If you frequently generate invoices and credit memos for clients, turn off auto-apply credits. Additionally, if you need to assign particular credit memos to particular invoices. If it is off, what will occur is as follows:
• QuickBooks won’t apply any credits you enter to any outstanding invoices.
• There is a Credits section when you use Receive Payment to receive a customer payment (if the customer has credits). After that, you can decide which invoices to apply credits to and when.
• The Customer Balance Detail report reveals that both the invoice and the credit memo have open balances if no credits have been linked. On the Customer and Sales transaction pages, they are also displayed as Open.

How to take auto-applied credits out of an invoice

• Choose the bill to which the credits have been applied.
• Choose the date after clicking the blue credit application hyperlink. The payment transaction will start.
• After choosing More, choose Delete.
• Create a journal entry, then apply the credit, if you want to transfer credit from one customer to another.

Step 2: Create a credit memo

• Select + New.
• Select Credit memo.
• Choose the customer’s name from the Customer dropdown.
• Enter the credit memo’s information, including the amount and the date. Using a custom credit service item will enable you to quickly add it as a single line item to credit memos.
• Choose Save and close when finished.

Step 3: Integrate the credit memo with an invoice

If you enable auto-apply credits, QuickBooks will do it for you. Here’s how to manually apply a credit memo to an invoice if you disable it.

• Select + New.
• Choose Receive payment.
• Choose the customer from the Customer dropdown menu.
• Select the open invoice you want to apply the credit memo to from the Outstanding Transactions section.
• Select the credit memos you want to apply in the Credits section.
• Enter how much of the credit you want to apply to the open invoice in the Payment column.
• Leave the fields for Payment method, Reference number, Deposit to, and Amount received empty.
• Complete the rest of the form, including the Payment Date.

Create and apply a delayed credit 

Step 1: Establish a delayed credit

• Select + New.
• Select Delayed credit.
• Select the customer’s name from the Customer dropdown menu.
• Add the information, including the amount and the date. Tip: You can make a custom credit service item so you can easily add it to delayed credits as a single line item.
• Choose Save and close when finished.
• The delayed credit is preserved in this way. You can decide to use it the following time you send the client an invoice.

Step 2: Apply the delayed credit to an invoice

Remember that adding a delayed credit to an invoice from a previous accounting period will change the balances for that period.

• Select + New.
• Select Invoice.
• Choose the customer from the Customer dropdown menu. This brings up a window displaying all current transactions for the client, such as invoices and overdue credits. Note: To display this, click the tiny arrow next to the invoice’s Balance Due if you can’t see it.
• Locate the delayed credit and click Add. This adds the credit as a line item to the invoice.
• As necessary, complete the remaining fields on the invoice.
• Choose Save and close when finished.

How to record Credit Memo / Sales Return entry against Cash Sales in QuickBooks

A Credit Memo can be made if a customer paid more than was due, returned an item, asked for a refund, or was given store credit. Once finished, you can apply it to an active invoice for a specific client.

To create a credit memo in QBO, follow these steps:

• Credit Memo can be chosen by clicking the Plus (+) icon.
• Pick the customer’s name.
• Type the Credit Memo Date here.
• Fill in the required details.
• Close by clicking Save.

If a credit memo has already been made, you can use it to apply to the invoice. For instructions, see below:

• From the left pane, select Sales.
• Click the customer’s name after selecting Customers.
• Select Receive Payment after finding the invoice you want to use the credit on.
• On the Receive Payment window, enter the required data.
• Make sure the right invoice is chosen in the Outstanding Transactions section.
• To save and exit, click.

You can apply the credit to your client’s open invoices by following the above-mentioned steps.

Create a sales order return 

Creating a sales order return is mentioned here.

• Select Orders after going to Sales Order.
• The sales order you want to create a return for should be selected after choosing the All tab.
• To make a partial return, choose Manual from the Returns section. Select Return All to send back the entire order.
• (For partial returns) Complete the return information, including the quantity returned.
• Fill in the return information, such as the quantity returned (for partial variant returns).
• Choose Create.
• Choose which batch you want to return the variants to, then click Create Return (for batch variant returns).
• You may only choose batches that were sold in the sales order.

Review returns for sales orders:

Here’s how to check the status of your returned goods after you’ve received them and make changes.

• Select Returns under Sales Orders.
• Pick the redirected order.
• Choose Receive. It modifies the levels of your stock.

Manage bulk returns for sales orders:

Here’s how to manage multiple sales order returns in bulk if you have to.

• Select Returns under Sales Orders.
• Next to CREDIT MEMO, check the box. The actions you can perform in bulk are shown here.
• Choose an action from the Bulk Actions dropdown menu.

Send a return to a different stock location

Returns do not always need to be sent back to the source. One of the reasons you might want to do this is to quarantine products for inspection before you can add them back to your inventory or write them off.

Here’s how to make a quarantine location in QuickBooks Commerce:

• Select Company Details from Settings after going there.
• Select Add Location, then enter the information.
• Select Create.

The return can be made and sent to a different address as shown here:

• Select Orders from the Sales Order menu.
• Choose the All tab, then choose the sales order for which you want to create a return.
• Choose Manual under the Returns section to submit a partial return. Choose Return All to return the entire order.
• (To partially refund) Details about returns, such as the number of returned items, should be filled in.
• The quarantine location can be chosen from the Return To dropdown.
• Pick Create.

How to Give your customer a credit or refund in QuickBooks Desktop

Discover how to make a credit note or refund check using QuickBooks Desktop for Windows.

Give your customers a refund or credit quickly and easily with QuickBooks.

Step 1: Make a credit note.

• Choose to Create Credit Notes/Refunds under Customers from the menu.
• Please choose your customer from the Customer: Job drop-down.
• Choose Save & Close after entering the items you want to credit. 

Step 2: Determine how you’ll manage the credit.

• Select OK after selecting one of the following options in the Available Credit window.
• For the credit note, QuickBooks records a negative amount in your Accounts Receivable (A/R) register. This credit may be applied toward another purchase. You could see the available credits in the customer payment window if you decided to keep them as an available credits.
• The refund can be given in cash or by check. Learn how to issue a credit card payment refund if your customer used one.
• The Apply Credit to Invoices window is opened by QuickBooks. Choose the invoice to which you want to apply this credit.

Option 1: Keep as a credit that is available.

• The window for receiving payments will appear
• Choose Customers, then click Accept Payments.
• Choose your customer from the Received from drop-down menu.
• Select the icon for discounts and credits next.
• Check the credit you want to apply for under the Credits tab, then click Done.
• A prompt to confirm the transfer may appear. If so, choose Yes. The sum will be automatically applied to the invoice.
• the Save & Close option.

Option 2: Issue a refund

• The check is automatically filled out. Choose OK.
• Incorporate the check and the overpayment. Select Receive Payments from the Customers menu after navigating there.
• Choose the Customer from the Received from drop-down menu.
• Select the icon for discounts and credits next.
• After choosing the check you wrote in the Available Credits section, click Done.
• An invitation to confirm the transfer might appear. Select Yes if you do. Automatic application of the sum to the invoice will take place.
• Decide on Save & Close.

Option 3: Charge a credit against an invoice.

• Make sure Customer: Job is selected when you create the credit note. By doing this, the Apply Credit to Invoice window will open.
• Choose the credit that you want to apply for automatically, then click Done.

How to adjust Sales Return with new Items issued to Customers in QuickBooks

Learn about QuickBooks Online’s customer refunding procedures.

Don’t worry if you have to return a customer’s money. Here is a list of different refund recording scenarios. This guarantees that your books are current.

Refunding a customer who has already paid an invoice

• Select Credit memo after choosing + New.
• Choose the appropriate customer from the Customer field.
• Enter the category, product, or service you are receiving a credit for along with the credit memo date, amount, tax, and product/service.
• Reminder: If you select an item from inventory, QuickBooks will add it back to inventory. You can adjust your inventory if the item is broken or if you don’t want it added back to stock.
• Close after selecting Save.

Note: If the customer overpaid, you will already have an unapplied credit that serves as your credit memo and do not need the credit memo.

• Select Expense after choosing + New.
• Choose or enter the desired customer in the Payee field.
• Choose the bank from which the money is being refunded in the Payment account field.
• Choose the Debtors account from the Category field (Accounts receivable).
• Enter the refund’s amount in the Amount field.
• Choose the appropriate Tax (not inclusive/exclusive of tax) in the Tax field.
• Choose Save.
• Next, select Receive payment under + New.
• Add the customer, then pick a payment option and a recipient for the deposit.
• Since they cancel each other out, the balance should be 0.
• Close after selecting Save.

Refund for products or services that the customer wasn’t satisfied with:

If a client requests a refund for a good or service, you can use a refund receipt.

• Select + New.
• Choose either Give refund or Refund receipt.
• The customer you want to refund should be selected from the Customer dropdown.
• Choose the bank you deposited the payment for the invoice to, then select the Refund From dropdown.
• In the Product/Service column, add all the goods or services the customer returned.
• Fill in the appropriate values for the date, number, rate, amount, sales tax, and other fields before choosing Save and close.

Refund an overpayment or credit made by a customer.

Note: You can use Check or Expense to record a refund to your customer.

• They need to use their unused credits.
• They prepaid for an order, but they cancelled it before the goods or services arrived.
• They need you to pay back an unintentional overpayment.
• The customer’s open credit, overpayment, or prepayment are offset by using Check or Expense to record the refund. This lowers the balance on your bank’s account.

Step 1: Record the refund for your customer.

• Select + New.
• Choose Expense, Add expense, or Check. Follow the instructions to first switch to Accountant view if you are in Business view. Then return to these actions.
• From the Payee dropdown, choose the client you wish to reimburse.
• Choose the bank account you deposited the overpayment to from the Payment account dropdown.
• Choose Accounts Receivable from the Category column’s first line.
• In the Amount field, enter the amount you want to refund.
• Select Save and close after completing the other fields as necessary.

Step 2: Connect the customer’s credit or overpayment to the refund.

• Choose + New.
• Choosing Receive payment.
• When entering the refund, choose the same customer as the check or expense.
• As you see fit, fill out the remaining fields.
• Select the checkbox next to the expense or check you made when you recorded the refund under the Outstanding Transaction section.
• Note: If you have automated bill payments enabled, this step has already been completed for you.
• Select Save and close after making sure the payment is equal to the open balance.

How to access Profit & Loss Report in QuickBooks

A P&L report is better run on an accrual basis than cash flow because it includes revenue and expenses that you are either owed or owe, regardless of whether money has actually changed hands. For instance, even if you haven’t paid for the materials yet, the materials used in a specific job reduce your net income. Compared to looking at cash flow, this offers a much better match between revenues and expenses.

You will discover how to run a profit and loss (P&L) statement in QuickBooks Online in this article. Income, expenses, and net profit are all included in a P&L report, also known as an income statement. You will learn how to set up the P&L report’s fundamental options in this guide, as well as how to further customize it by adding filters, specific rows and columns, and unique headers and footers.

Step 1: Go to Profit and Loss

Click Reports in the left menu bar to start creating a new P&L report. Open the Business overview group, then click on Profit and Loss. Standard reports are divided into ten groups.

Step 2: Configure the Profit and Loss Report’s Basic Options

The top menu bar with the default options that can be changed for your report can be seen by scrolling to the top of the Profit and Loss Report screen.

Select one of the options below for your report:

• Reporting period: Specify the time frame for which you want your income and expenses to be totalled. To select a predefined period, use the drop-down box, or to create a custom period, enter the start and end dates. 
• Sort columns by: By default, the QuickBooks Profit and Loss report sorts the period totals by only one column. To display any subtotal columns, simply click the drop-down box. Subtotals for time frames, clients, suppliers, classes, locations, and other categories are all available for display. 
• Show non-zero or active only: Using this option, you can choose which columns or rows to include in your report. Only rows and columns with activity during the period are displayed by default. Selecting only active data, zero-only data, or rows or columns of all data is an option.
• Compare your P&L report to another period, such as the prior year or the current year. 
• Accounting method: Decide whether to prepare the Profit and Loss Report using the accrual basis of accounting or the cash basis. Accounts payable (A/P) is treated as an expense in accrual accounting, and accounts receivable (A/R) is treated as revenue. 
• Run report to make your changes effective, press this button. 
• Customize: Click this button to further tailor your report (we’ll show you how to do this in Step 3, the following section). 
• Save Customization: Choose this option and give your report a name if you’ve made a lot of changes that you’ll want to duplicate frequently. In the future, you’ll be able to select this personalized report from the Reports tab.

Step 3: Further customize your profit and loss report

By selecting the Customize button, you can further modify the Profit and Loss report in addition to the default choices made at the top of the page.

Step 4: Print Your Profit and Loss Report, Email It, or Export It

The icons in the top right corner of the report allow you to print, email, or export your profit and loss statement as necessary.

• To email a PDF copy of your report, click the mail icon.
• To print out a copy of your report, choose the printer icon.
• To export your report as an Excel or PDF file, click the arrow next to the export icon.

How to access the Balance Sheet Report in QuickBooks

A balance sheet report provides you with a financial overview of your business as of a particular date. By deducting all of the money your company owes (liabilities) from everything it owns (assets), it determines how much your business is worth (your business’s equity):

Note: The total for equity includes the business’s fiscal year’s total net income.

Steps to Run a report on the balance sheet:

• Reports can also be found by going to Business overview and selecting it.
• Identify Balance Sheet.

How to access Inventory Valuation Detail Report in QuickBooks

It is essential to manage your inventory if you want to reduce or even completely avoid problems with over- and understocking, which can then have an impact on the viability of your company’s finances. This rule is followed by QuickBooks, and their products give their clients access to the necessary inventory reports. Our guide to QuickBooks inventory reports contains information on how they appear, function, can be customized, and provides answers to additional questions.

Reports on inventory valuation from QuickBooks Online:

• In the Sales and Customers section of QuickBooks Online, you can find inventory reports.
• Or you can just use the search bar to look them up by name.

Steps for using QuickBooks Online to run inventory reports:

It’s quite easy. Click Run report after selecting the required report, in this case the inventory valuation detail, and after specifying or selecting the report period.

How to access different ledgers in QuickBooks

In QuickBooks Online, we advise running the General Ledger report to view an account ledger. Then, customize this to only display a particular account.

Here’s how:

• Select Reports from the menu on the left panel.
• In the search box, enter “General Ledger.”
• To customize, click the button. Then. select the Filter drop-down menu.
• Mark the Account checkbox, then select the desired account from the drop-down menu.
• The other choices can be filtered.
• Select Run Report from the menu.

General FAQs: