How to account for re-imbursement check from a vendor

[Customer Service]

How to account for re-imbursement check from a vendor.

A vendor owes us a credit for which they have sent a check. There is a negative balance in my Accounts Payable for them. How do I post the receipt of the check to clear the A/P.

The following assumes that you have already entered a credit memo to the vendor that reflects the return. The general steps for handling a vendor reimbursement check would be:

1. Open Bank Accounts/Deposits.
2. Select Receipt type Other, to record that you have received the check and are depositing it into your bank account – presumably that is what actually happened. The actual G/L account you use for the deposit distribution is not critical, since the amount is going to be “washed out” by the next transaction, but it would be best to have something like a “Purchase refunds” asset account.
3. Open Payables/Vender Invoices.
4. Select Debit Memo as the Transaction Type.
5. Enter the vendor.
6. Enter the amount of the refund check. A debit memo increases a vendor's balance, taking the vendor from a credit to a zero balance, assuming there are no other outstanding transactions for this vendor. In this debit memo you should distribute the amount to the “Purchase refunds” (or whatever) account used in the deposit.