How to Apply Vendor Credit in QuickBooks Online

If you've received a vendor refund check or bill credit, you can record it in QuickBooks* as a vendor credit. Using QuickBooks Online by Intuit, you can apply a vendor credit in three simple steps:

1. Enter the vendor credit.

2. Record the bank deposit.

3. Link the two using Pay Bills.

These basic instructions, on how to apply vendor credit in QuickBooks Online, will be sufficient in the majority of cases, such as:

• The vendor accidentally ran duplicate or incorrect credit card charges.

• The vendor overcharged on goods or services.

• You paid a fixed amount for a project and the actual cost came out lower than the initial quote.

• You returned faulty goods to the vendor and received a refund for the returned items.

How to Apply Vendor Credit in QuickBooks Online: Step by Step

You don’t need help from the QuickBooks team or the large community of QuickBooks users to apply a vendor credit. Just follow these simple steps. 

1. Enter the Vendor Credit

-The first step when applying a vendor credit is to create a new vendor credit:

1. Click on the + New and under Vendors select Vendor Credit.

2. On the Vendor Credit page, select the vendor name from the drop-down menu.

3. Find the invoices and sales receipts for which you received credit and select all of the relevant bills, Category details, and/or Item details, depending on how you record your purchases.

   1. If you hadn't recorded the bill, you can create a new bill by clicking on + New, and under Vendors selecting Bill. Enter the details of the original bill in the Expenses tab and click Save.

4. In the Vendor Credit window, enter the credit amount for the selected bills.

5. Once you have finished entering the vendor credit, click Save and close.

2. Record the Bank Deposit

-The second step is to record a bank deposit for the vendor check or credit card payment to link to the vendor credit:

1. Click on + New. Under Other or Banking, select Bank Deposit.

2. In the deposit section, select the credit card account where the refund check was deposited from the Account drop-down menu.

3. In the Add funds to this deposit window, enter the details of the refund:

   1. Under Received from, select the vendor.

   2. In the Account column, select Accounts Payable. Even though you are recording a credit (money received), the bill credit is from a vendor rather than a customer.

   3. Under Payment Method, enter the payment method used for the vendor credit (credit card, refund check, electronic funds transfer, etc.).

   4. In the Amount column, enter the amount of the refund.

4. Click Save and close.

3. Link the Vendor Credit and Bank Deposit Using Pay Bills

The third step is to link the vendor credit and bank deposit using Pay Bills so that the credit is applied to your balance:

1. Click on + New and select Pay Bills under Vendor.

2. Select the bank deposit you just created. The amount of the vendor credit will appear in the Credit Applied field on the same line.

3. Check that the Total Payment is $0.00.

4. Click on Save and close.

A Tax Professional Can Help

Accounting agencies like Golden Apple Agency have tax professionals who offer QuickBooks bookkeeping services, typically with a range of pricing and service options available for small businesses. These tax professionals can take care of entering accounts payable and accounts receivable—including vendor credits—and make sure that everything is reconciled correctly in your QuickBooks account while you focus on your business.

If you’re happy to do your bookkeeping yourself, you can go ahead and record vendor credits and check to make sure that all of your accounts payable are balanced and closed. The good news is that QuickBooks makes the process easy, so you should get the hang of it quickly.

If your situation is more complex, if you use QuickBooks Desktop, or if you would like someone to guide you through the process, our QuickBooks ProAdvisors can provide step-by-step training and support. Even the best software is no substitute for expert accounting and tax services, and our experts are here for you if you need us. 

*QuickBooks, QB, TurboTax, Proconnect and Mint are registered trademarks of Intuit Inc.