Not all refunds are created equal. Shopify handles several refund scenarios:

QuickBooks offers multiple ways to record refunds. Here's when to use each:

Option 1: Refund Receipt

Use when: You issued a refund AND returned money to the customer's payment method.

Path: + New → Refund Receipt

Effect: Reduces sales revenue, creates negative transaction in bank feed

Option 2: Credit Memo

Use when: You're giving store credit (not returning money) or need to apply credit to future invoice.

Path: + New → Credit Memo

Effect: Creates credit balance on customer account

Option 3: Journal Entry

Use when: Complex scenarios like cross-period refunds or chargeback fees.

Path: + New → Journal Entry

Effect: Direct GL adjustment

Step-by-Step: Full Refund

1. In QuickBooks, go to + New → Refund Receipt
2. Select the customer (or use "Shopify Customer" for guest checkouts)
3. Enter the original order number in Reference field
4. Add line items matching the original sale
5. Set the refund date (should match Shopify refund date)
6. Choose the payment method/account
7. Save

Automated Import

When you export refunded orders from Shopify and convert with our tool:

• Refunds are flagged with Financial Status = refunded
• Amounts appear as the refunded total
• Import as Refund Receipts (not Sales Receipts)

Partial refunds are trickier because you need to show:

• The original sale amount
• The partial refund amount
• The net revenue

Option A: Separate Refund Transaction

1. Keep the original Sales Receipt as-is
2. Create a Refund Receipt for the partial amount
3. Reference the original order in the memo

Pros: Clear audit trail
Cons: Two transactions for one order

Option B: Edit Original Transaction (Same Month Only)

1. Find the original Sales Receipt
2. Reduce the line item amounts to post-refund values
3. Add note explaining the adjustment

Pros: Single transaction
Cons: Loses audit trail, only works for same-month refunds

Recommendation

Use Option A (separate transactions). Audit trails are worth the extra line item in your reports.

When you charge a restocking fee, the customer gets less back than they paid:

Example

• Original order: $100.00
• Restocking fee: $15.00 (15%)
• Refund issued: $85.00

Recording in QuickBooks

1. Create Refund Receipt for $85.00 (amount actually refunded)
2. The $15.00 restocking fee is income you keep
3. Two options for the fee:
   • Simple: Don't record separately (original $100 sale - $85 refund = $15 net revenue)
   • Detailed: Create "Restocking Fee Income" account, add as positive line item on refund

Chargebacks are the worst-case refund scenario. The customer disputes the charge with their bank, and you lose:

• The sale amount
• A chargeback fee ($15-25 typically)
• Sometimes the product too

Chargeback Timeline

1. Dispute filed: Customer contacts bank
2. Provisional credit: Bank refunds customer immediately
3. Notification: Shopify alerts you (email + admin)
4. Response period: You have 7-21 days to submit evidence
5. Decision: Bank rules in favor of merchant or customer
6. Final: If you lose, funds + fee deducted from your payout

Recording a Lost Chargeback

1. Refund Receipt for the order amount (same as regular refund)
2. Expense for the chargeback fee:
   • Account: "Bank Service Charges" or create "Chargeback Fees"
   • Amount: $15-25 (check your Shopify payout for exact amount)
   • Memo: "Chargeback fee - Order #XXXX"

If you successfully dispute a chargeback:

1. The sale amount is not deducted (no refund needed)
2. The provisional hold is released
3. You may still pay a reduced fee in some cases

QuickBooks Treatment

If you haven't recorded anything yet: do nothing. The original sale stands.

If you already recorded a refund (jumped the gun): reverse it with a Journal Entry or delete the refund transaction.

The Problem

Sale in December, refund in January. Which month takes the hit?

Accounting Principle

Technically, refunds should reduce revenue in the period of the original sale (matching principle). But for small businesses, this creates complexity.

Practical Approach

• Under $1,000/month in refunds: Record refunds in the month they occur. Simpler.
• Over $1,000/month or seasonal business: Consider accrual-based refund reserve.
• Year-end refunds: If December sale is refunded in January, consider adjusting December books for tax purposes.

Bottom line: Consistency matters more than perfection. Pick a method and stick to it.