Refund customer overpayment

Legacy KB ID: 5561


How to enter the Customer refund where the cash refund was made? Customer has accidentally overpaid the invoice and now would like a refund for this. How do I enter it?

Example: I have issued an invoice on $100. Customer has paid me $200. Now I must refund $100 back to the customer. How do I record this?


Please note below suggestion is guide only. You should seek an accountant’s advice on this too to make sure this applies to your situation.

When customer overpays the invoice, it must be recorded against the invoice for various reasons such as audit or bank reconciliation. User is often required to show the total invoice with receipt of overpayment and refund on that too.

In your situation, you have

1) Invoice for $100

2) Customer payment receipt for $200

3) And refund $100

Assuming you have done the transactions in above order, where you have received the Money and issued credit for $100 as shown below, you will need to refund the amount using Journal and link that refund to the invoice. The whole process is explained as below:

Recording the Customer overpayment:

To record the overpayment of the invoice please follow the below steps:

1) Go to the invoice and click on ‘Receive Payment’ button.

2) Click on ‘View Full Details’

3) Fill out the relevant information, and untick the ‘use transaction total’ to unlock the amount box.

4) Enter the amount that customer have overpaid, $200 in this example.

5) Under ‘How much to allocate’ column enter the actual invoice amount, $100 in this example.

6) Click save to close the window.

7) You will see the prompt message to issue Credit. Click on issue credit.

And close the window

Issuing the refund to the customer:

Once the customer overpayment has been recorded, you can use that credit in the future transaction to the customers or apply to other invoices if any. However, if the customer needs a refund, please follow the below steps for the journal:

1) GO to add new Journal.

2) Accounts receivable Dr for the refund amount ($100 in your example)

3) Make sure you select the customer in the contact column.

4) Bank Account Cr

5) Save and close

Now what this does is create the refund of $100, but it is still not linked to the original amount of $200, that we have received for the original invoice.

1) GO to the original invoice for that contact.

2) Click on the blue hyperlink for the Amount under Already paid.

3) You will see the link for Receipt and date as shown below.


5) Click on the receipt link

6) You will now see the Receive Money window. And there should be a new line under ‘ALLOCATE THIS MONEY TO AN EXISTING TRANSACTION’.

7) Under ‘How Much to Allocate’ Column, enter the refund amount. i.e $100 in your example.


9) Click save.

This will now link that refund journal entry to the original invoice, and the customer balance will go to nil. Customer statement will look like this.

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