How do I deal with Refunds for Overpaid Invoices?

AndréKoch

I mean I know I can create a journal entry and move the excess payment out of sales and into a refund expense account.

But does the excess value actually go into sales in the first place?

And how do I reflect that this excess amount has been deducted from the customers total payments to the company. I think a graphical view of this would make it more clear as its hard to explain, so I've attached a sample of the Aged Receivables report.

As you can see, the highlighted negative values bring down the overall value that is supposed to come into the company, so how do I correct this?

Petra_B

So let's say you invoiced for $100 and you got $120. You'll still record this transaction as payment for the invoice. You'll record the payment as $120.

Then, you make an expense for the amount of the refund and categorize it as Refund for an Invoice. It'll balance out everything.

If you're on the old version of Wave, I'd create a credit note instead. That's just an invoice with a negative value. You can make that for the amount of the refund and record the payment once you pay it out. It'll end up a negative income transaction, which looks a little weird, but it'll fix up everything. Plus, you get an extra bit of paper trail. The important part is to record the payment for the original transaction as the full amount paid, not for the amount of the invoice.

Makes sense, @AndréKoch?