Note: We recommend that to record a refund, you enter a standard invoice and apply the prepayment to it. Then enter a debit memo and pay it with a Refund payment in the Payments window. See: Refunds for Prepayments
Alternatively, record the refund by using the following method.
You can record a refund from a supplier that pays back an unused prepayment or part of a prepayment. When you do this, Payables reverses the prepayment so that it is no longer outstanding and so that you can no longer apply the prepayment to an invoice. The net effect is a debit to your cash (asset) account in the amount of the refund and a credit to the prepayment account in the amount of the refund.
You can use exactly the same method to record a refund from an employee for an advance.
Prerequisites
You have entered and paid a prepayment or advance.
The supplier or employee has refunded the unused portion of the prepayment.
If the supplier or employee has not refunded the entire prepayment, apply the appropriate amount of the prepayment to an invoice or expense report.
To record a refund of a prepayment:
In the Invoice Workbench, enter an invoice in the amount of the refund from the supplier. Enter Standard for the type. Enter a description on the invoice to indicate that you are retiring a prepayment. Create an Invoice distribution for the amount of the refund to debit your cash account.
Choose the Actions button to navigate to the Invoice Actions window. Select the Apply/Unapply Prepayment check box and choose OK.
Select the prepayment you want to apply. Enter the refund amount in the Amount To Apply field. Optionally change the GL Date.
Choose the Apply/Unapply button to apply the prepayment amount to the invoice you entered for the refund and to save your work.
This fully retires the prepayment. This credit balances the debit you entered on the invoice (Step 1) to the Cash account.