Example: Credit Card Refund

A customer purchases goods or services from you with a credit card. An invoice is created for 90.00 for the purchased items. The credit card company deposits funds directly into the bank account for the customer's purchase. Meanwhile, a refund in the amount of 150.00 is issued by the credit card company for returned items previously paid for by the customer. The refund amount is greater than the credit card payment (90.00) from the customer, which results in a negative amount of 60.00. To offset the negative amount, create a receipt for -60.00 and apply it to a credit memo for the refund and to the invoice for which the customer paid.

The credit card company directly deposits and withdraws funds from the bank account.

To complete this scenario:

1. Create an invoice (RI) for the customer in the amount of 90.00.

2. Post the invoice to create these G/L entries:

   • Debit of 90.00 to A/R trade.

   • Credit of 90.00 to store sales.

3. Create a credit memo (RM) for the refund amount of 150.00.

4. Post the credit memo to create these G/L entries:

   • Credit of 150.00 to A/R trade.

   • Debit of 150.00 to store sales.

     The A/R trade account reflects a credit amount of 60.00.

5. Using the Standard Receipts Entry program, create a negative receipt in the amount of 60.00 and apply it against the credit memo (RM) for 150.00.

6. Apply the remaining 90.00 to the customer's invoice (RI).

   When you complete the receipt, the system closes the credit memo and the open A/R invoice in the F03B11 table.

7. Post the receipt to create these G/L entries:

   • Debit of 60.00 to the A/R trade.

     This entry offsets the negative amount created by the credit memo.

   • Credit of 60.00 to the bank account.