How to return an Item Paid for with a Check

I always love a good challenge and another ProAdvisor recently presented me with a problem she had to solve for a client. Her client had made a purchase by check of an item from Lowe’s and returned it for a refund. The problem was that, unlike with credit memos against vendor bills or credit cards, QuickBooks only allows you to offset a deposit with an account, not an item. Neither does it allow you to write a negative check.

Here’s the solution I came up with. Let me know if you have a better idea.

Let’s look at the original transaction entered through the “Write Checks” form. We made a purchase of five windows, an “item”, from Perry Windows & Doors for $125 as shown below.


We returned the windows for a cash refund. We now need to record a $125 deposit to our checking account and credit our “Window” item for five windows.

Step 1

Create a bank type account and name it “Clearing”.


Step 2

In the “Write Checks” window enter a $0 check against the bank account, “Clearing”, which we just created. Using the “Expenses” tab, select that same “Clearing” account and enter $125. Then click the “Items” tab, select the item “Window” and enter a quantity of -5 for a total of -$125. This is shown below.


We have now accomplished our reduction in our “window” item and moved what should have been a deposit to checking into our clearing account.

Step 3

Make a deposit to our Checking account from the “Clearing” account we created.


We have just accomplished our refund to checking and our reduction in the “window” item.

Step 4

Our balance in the “Clearing” account is now zero because the amount we moved into it with our check was taken out of it with our deposit. Since we no longer need it we make it inactive so we don't accidently use it to make deposits or write checks in error. We can’t delete it because it has been used in transactions but we can hide it. There is a good likelihood we will need it at some point in the future anyway.


I have included the accounting entries by transaction and then by account so you can follow the results.