Issuing a refund: how to record it and have it show up in the Customer Report

[Geert Janssens]

On donderdag 31 augustus 2017 07:16:50 CEST DaveC49 wrote:
> Robert,
> 
> Would the Credit Note facility not suit to record what essentially becomes a
> reversal of part of an Invoice which would be included in the Customer
> report? The discussion of the implementation is not all that clear in the
> manual
> (https://www.gnucash.org/docs/v2.6/C/gnucash-help/busnss-ar-invoices1.html#b
> usnss-ar-invoicenew2) but there is a little more in the Wiki mainly about
> it's future
> implementation in 2012? I gather it was been implemented in 2.6. The
> Tutorial and Concepts guide mentions it in the section on Invoices but does
> not discuss what it does in any detail.

It has been implemented for 2.6 indeed. The first versions were a bit buggy. 
It stabilized around gnucahs 2.6.5. I would recommend to use at least that 
version.

> What a Credit Note should do in principle is to credit the Accounts
> Receivable by the amount of the repayment and debit any Sales Revenue
> (Income) and any associated Tax accounts to reverse the corresponding parts
> of the original transaction. The implementation of the business features is
> normally pretty rigorous in GnuCash so I think this is what will occur.
> 
This is exactly what happens.

> Frequently in accounting practice  th reversal of the Revenue componentis
> done by debiting a contra account to the Sales Revenue often called Sales
> Returns and Allowances. I.e. you have a Summary placeholder account Nett
> Revenue  which has Sales Revenue and  Sales Returns and Allowances as child
> accounts summing into it. Accountants generally prefer this way of doing it
> as it makes clear how much of the total revenue has had to be refunded which
> most managers would want to control. You could also simply debit the Sales
> Revenue account directly with a note in the Description/memo fields if this
> is not something you need to manage
> 
I never thought of the contra account idea. It's an interesting way of 
recording refunds and gnucash can be set up for this purpose.

> I have not yet checked out whether the Credit Note does actually reverse
> both part of the original Sales revenue account and any Tax accounts
> affected, but as it uses the Invoice structure to implement it, it should do
> so using any tax tables you have in place for your Invoices.
> 
It does.

> When you make the actual repayment to the customer, the transaction will be
> a credit to your Check/Bank account for the amount of the refund and a
> corresponding debit to the Accounts Receivable for the amount of the refund
> which reverses the credit entry made to Accounts Receivable when you post
> the Credit Note.

Indeed. Just to be complete I'll add that to clear the "invoices due 
reminder", one should apply the payment via any of the available business 
options to do so.
- directly from the Invoices Due reminder window
- or via Business->Customers->Process Payment... and select the customer and 
credit note there.
- or via Business->Pay Invoice when the credit note is open in front of you

Regards,

Geert