# I need to refund a customer or cancel an invoice I already recorded — how do I do it without just deleting the invoice?
- **[QuickBooks Online · QuickBooks Online Advanced, Plus, Simple Start, Essentials, Free, Lite, Intuit Enterprise Suite, QuickBooks Solopreneur Plus · United States (en-US QuickBooks Online help edition) · Businesses using QuickBooks Online]** In QuickBooks Online, deleting a transaction removes it everywhere except the audit log, which retains it. → [CG-MCE-038#S03](#s-CG-MCE-038-S03)
- **[QuickBooks Online · US (en-US) help article, updated 8/3/2026 · United States (QuickBooks Online US English edition help article) · Businesses using QuickBooks Online to bill customers]** In QuickBooks Online, a credit memo is sent to a customer to reduce how much they owe after a return, a discount or a billing error; it keeps the customer's accounts receivable balance correct but does not alter the original invoice records. → [CG-MCE-038#S17](#s-CG-MCE-038-S17)
- **[Not stated in the document; general commercial practice described by a US-based publisher (AccountingTools, Inc.) · Sellers and their customers]** A credit memo is not the same as a refund: a credit memo is a seller-issued document reducing what the customer owes (typically for returns, pricing adjustments or billing errors), whereas a refund involves returning cash to the customer. → [CG-MCE-038#S11](#s-CG-MCE-038-S11)
- **[Not stated in the document; general commercial practice described by a US-based publisher (AccountingTools, Inc.) · Buyer that has paid the invoice in full]** Where the buyer has already paid the invoice in full, the buyer has the option of either offsetting a future payment with the credit memo or using it as the basis for demanding a cash payment. → [CG-MCE-038#S06](#s-CG-MCE-038-S06)
## What this page establishes
- How a recorded sale is reversed and how it settles against the customer's balance — Partly established (Required authority: authoritative professional or accounting standard. Highest achieved: high quality professional secondary reference, official platform documentation.)
- Why bookkeeping corrects records instead of altering the originals — Not established (Required authority: authoritative professional or accounting standard. Highest achieved: official platform documentation.)
- What your accounting software actually does with credits, refunds, voids and deletions — Not established
- Which period the reduction in revenue is reflected in — Partly established (Required authority: authoritative professional or accounting standard. Highest achieved: high quality professional secondary reference, official platform documentation.)
- When a state lets a seller adjust tax on a sale that is later credited or refunded — Partly established
- Extra handling for a reversal that reaches a closed or reported period — Not established (Required authority: authoritative professional or accounting standard. Highest achieved: primary regulator or government.)
- What the credit document itself should show — Not established
- Undo the sale with a new record — don't delete or edit the invoice — Not established (Required authority: authoritative professional or accounting standard. Highest achieved: official platform documentation.)
- Credit or refund: which one your situation calls for — Partly established (Required authority: authoritative professional or accounting standard. Highest achieved: high quality professional secondary reference, official platform documentation.)
- Reversing the whole sale, or only part of it — Partly established (Required authority: authoritative professional or accounting standard, official platform documentation. Highest achieved: high quality professional secondary reference, official platform documentation.)
- Unpaid, part paid or already paid: how the reversal settles the account — Partly established (Required authority: authoritative professional or accounting standard, official platform documentation. Highest achieved: high quality professional secondary reference, official platform documentation.)
- What the reversal does to the revenue you already recorded — Partly established (Required authority: authoritative professional or accounting standard. Highest achieved: high quality professional secondary reference, official platform documentation.)
- Sales tax you already charged, reported and paid over — Partly established
- If the sale sits in a period you have already closed or already reported — Not established (Required authority: authoritative professional or accounting standard. Highest achieved: official platform documentation.)
- The records that back up the cancellation or refund — Partly established (Required authority: authoritative professional or accounting standard, high quality professional secondary reference. Highest achieved: high quality professional secondary reference, primary regulator or government.)
## Undo the sale with a new record — don't delete or edit the invoice
- In QuickBooks Online, voiding a transaction keeps a record of that transaction in the books, and that retained record does not affect totals. _(jurisdiction: United States (en-US QuickBooks Online help edition), entity_scope: Businesses using QuickBooks Online, platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced, Plus, Simple Start, Essentials, Free, Lite, Intuit Enterprise Suite, QuickBooks Solopreneur Plus, effective_from: 2026-09-07 (article last updated))_ `CG-MCE-038#S01`
> “When you void a transaction, you keep a record of the transaction in your books that don’t affect your totals.” — [Intuit Inc. — Void or delete transactions](https://quickbooks.intuit.com/learn-support/en-us/help-article/list-management/void-delete-transactions-quickbooks-online/L5sZV8GYh_US_en_US), 2026-09-07; Void or delete transactions - introductory paragraph. Verified 2026-09-09.
- In QuickBooks Online, deleting a transaction removes it everywhere except the audit log, which retains it. _(jurisdiction: United States (en-US QuickBooks Online help edition), entity_scope: Businesses using QuickBooks Online, platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced, Plus, Simple Start, Essentials, Free, Lite, Intuit Enterprise Suite, QuickBooks Solopreneur Plus, effective_from: 2026-09-07 (article last updated))_ `CG-MCE-038#S03`
> “You remove a transaction everywhere except the audit log when you delete it.” — [Intuit Inc. — Void or delete transactions](https://quickbooks.intuit.com/learn-support/en-us/help-article/list-management/void-delete-transactions-quickbooks-online/L5sZV8GYh_US_en_US), 2026-09-07; Void or delete transactions - "Important :" bullet list, third bullet. Verified 2026-09-09.
- In QuickBooks Online, a credit memo is sent to a customer to reduce how much they owe after a return, a discount or a billing error; it keeps the customer's accounts receivable balance correct but does not alter the original invoice records. _(jurisdiction: United States (QuickBooks Online US English edition help article), entity_scope: Businesses using QuickBooks Online to bill customers, platform: QuickBooks Online, platform_edition: US (en-US) help article, updated 8/3/2026, effective_from: 2026-08-03, conditions: reasons listed are examples given by the article: return, discount, or billing error)_ `CG-MCE-038#S17`
> “Send customers credit memos to reduce how much they owe you after a return, discount, or billing error. This keeps the customer’s accounts receivable balance correct, but doesn’t affect your original invoice records.” — [Intuit Inc. — Create and apply credit memos or delayed credits in QuickBooks Online](https://quickbooks.intuit.com/learn-support/en-us/help-article/customer-refunds-credits/create-apply-credit-memos-delayed-credits-online/L5kne9EiI_US_en_US), 2026-08-03; Article introduction, first paragraph (below title “Create and apply credit memos or delayed credits in QuickBooks Online”, Updated 8/3/2026). Verified 2026-09-09.
_Not established from an authoritative source._
_Required authority: authoritative professional or accounting standard. Highest achieved: official platform documentation._
## Why bookkeeping corrects records instead of altering the originals
_Not established from an authoritative source._
_Required authority: authoritative professional or accounting standard. Highest achieved: official platform documentation._
## Credit or refund: which one your situation calls for
- A credit memo (credit memorandum) is a document the seller of goods or services issues to the buyer that reduces the amount the buyer owes the seller under an earlier invoice. _(jurisdiction: Not stated in the document; general commercial practice described by a US-based publisher (AccountingTools, Inc.), entity_scope: Sellers of goods or services and their buyers, conditions: presupposes an earlier invoice)_ `CG-MCE-038#S04`
> “A credit memo is a contraction of the term "credit memorandum," which is a document issued by the seller of goods or services to the buyer, reducing the amount that the buyer owes to the seller under the terms of an earlier invoice .” — [AccountingTools, Inc. (author Steven Bragg) — Credit memo definition](https://www.accountingtools.com/articles/credit-memo), 2026-03-09; Heading "What is a Credit Memo?", first sentence. Verified 2026-09-09.
- Where the buyer has already paid the invoice in full, the buyer has the option of either offsetting a future payment with the credit memo or using it as the basis for demanding a cash payment. _(jurisdiction: Not stated in the document; general commercial practice described by a US-based publisher (AccountingTools, Inc.), entity_scope: Buyer that has paid the invoice in full, conditions: buyer has already paid the full invoice amount)_ `CG-MCE-038#S06`
> “If the buyer has already paid the full amount of the invoice, the buyer has the option of either using the credit memo to offset a future payment to the seller, or as the basis for demanding a cash payment in exchange for the credit memo.” — [AccountingTools, Inc. (author Steven Bragg) — Credit memo definition](https://www.accountingtools.com/articles/credit-memo), 2026-03-09; Heading "What is a Credit Memo?", third sentence. Verified 2026-09-09.
- A credit memo is not the same as a refund: a credit memo is a seller-issued document reducing what the customer owes (typically for returns, pricing adjustments or billing errors), whereas a refund involves returning cash to the customer. _(jurisdiction: Not stated in the document; general commercial practice described by a US-based publisher (AccountingTools, Inc.), entity_scope: Sellers and their customers, conditions: reasons listed are typical, not exhaustive)_ `CG-MCE-038#S11`
> “No. A credit memo is a document issued by a seller that reduces the amount a customer owes, typically due to returns, pricing adjustments, or billing errors. A refund involves returning cash to the customer.” — [AccountingTools, Inc. (author Steven Bragg) — Credit memo definition](https://www.accountingtools.com/articles/credit-memo), 2026-03-09; FAQs — "Is a credit memo the same as a refund?". Verified 2026-09-09.
- A credit memo creates a credit balance that can be applied to future purchases, rather than returning cash. _(jurisdiction: Not stated in the document; general commercial practice described by a US-based publisher (AccountingTools, Inc.), entity_scope: Sellers and their customers)_ `CG-MCE-038#S12`
> “A credit memo instead creates a credit balance that can be applied to future purchases.” — [AccountingTools, Inc. (author Steven Bragg) — Credit memo definition](https://www.accountingtools.com/articles/credit-memo), 2026-03-09; FAQs — "Is a credit memo the same as a refund?", final sentence. Verified 2026-09-09.
- QuickBooks Online states that if you have QuickBooks Payments, you can refund a customer who has already paid an invoice by using a credit memo. _(jurisdiction: United States, entity_scope: QuickBooks Online users with QuickBooks Payments, platform: QuickBooks Online, platform_edition: US (en-US) help article, updated 8/5/2026, effective_from: 2026-08-05, conditions: user has QuickBooks Payments; the invoice has already been paid)_ `CG-MCE-038#S29`
> “If you have QuickBooks Payments, you can refund a customer who has already paid an invoice with a credit memo.” — [Intuit Inc. — Refund your customer for a paid invoice in QuickBooks Online](https://quickbooks.intuit.com/learn-support/en-us/help-article/customer-refunds-credits/record-customer-refund-quickbooks-online/L5PbCkJk8_US_en_US), 2026-08-05; Body, opening paragraph under title "Refund your customer for a paid invoice in QuickBooks Online". Verified 2026-09-09.
- The article directs the credit-memo-plus-expense method to refunds involving a lost package or the Accounts Receivable (A/R) account, and says to create a refund receipt instead if you want to refund individual items or services. _(jurisdiction: United States, entity_scope: QuickBooks Online users choosing a refund method, platform: QuickBooks Online, platform_edition: US (en-US) help article, updated 8/5/2026, effective_from: 2026-08-05, conditions: refund involves a lost package or the A/R account; alternative applies when refunding individual items or services)_ `CG-MCE-038#S30`
> “Use this method for a refund involving a lost package or the Accounts Receivable (A/R) account. If you want to refund individual items or services, create a refund receipt instead.” — [Intuit Inc. — Refund your customer for a paid invoice in QuickBooks Online](https://quickbooks.intuit.com/learn-support/en-us/help-article/customer-refunds-credits/record-customer-refund-quickbooks-online/L5PbCkJk8_US_en_US), 2026-08-05; Body, second paragraph before "What you’ll need". Verified 2026-09-09.
_Partly established. Established: The distinction between a credit that reduces what the customer owes and a refund that returns money to the customer (S11, S12). Missing: The criterion that decides which of the two the situation calls for; The case where part is credited and part refunded._
_Required authority: authoritative professional or accounting standard. Highest achieved: high quality professional secondary reference, official platform documentation._
## How a recorded sale is reversed and how it settles against the customer's balance
_Partly established. Established: How a recorded customer sale is reversed in whole or in part through a credit or a refund record (S04, S08, S11). Missing: How each of the credit and the refund settles against the customer's balance depending on whether the invoice was paid._
_Required authority: authoritative professional or accounting standard. Highest achieved: high quality professional secondary reference, official platform documentation._
## Reversing the whole sale, or only part of it
- Where the buyer has not yet paid, the buyer can use the credit memo as a partial offset against its invoice-based payment to the seller. _(jurisdiction: Not stated in the document; general commercial practice described by a US-based publisher (AccountingTools, Inc.), entity_scope: Buyer with an unpaid seller invoice, conditions: buyer has not yet paid the seller)_ `CG-MCE-038#S05`
> “If the buyer has not yet paid the seller, the buyer can use the credit memo as a partial offset to its invoice-based payment to the seller.” — [AccountingTools, Inc. (author Steven Bragg) — Credit memo definition](https://www.accountingtools.com/articles/credit-memo), 2026-03-09; Heading "What is a Credit Memo?", second sentence. Verified 2026-09-09.
- A credit memo can be used as payment for an invoice either in part or in full. _(jurisdiction: United States (QuickBooks Online US English edition help article), entity_scope: Businesses using QuickBooks Online to bill customers, platform: QuickBooks Online, platform_edition: US (en-US) help article, updated 8/3/2026, effective_from: 2026-08-03)_ `CG-MCE-038#S19`
> “Your customer can use their credit memo as payment for an invoice, either partially or in full.” — [Intuit Inc. — Create and apply credit memos or delayed credits in QuickBooks Online](https://quickbooks.intuit.com/learn-support/en-us/help-article/customer-refunds-credits/create-apply-credit-memos-delayed-credits-online/L5kne9EiI_US_en_US), 2026-08-03; Learn the differences between credit memos and delayed credits — Credit memo. Verified 2026-09-09.
- The amount of credit applied to an unpaid invoice is entered by the user in the Payment column of that invoice, so a chosen amount rather than necessarily the whole credit is applied. _(jurisdiction: United States (QuickBooks Online US English edition help article), entity_scope: Businesses using QuickBooks Online to bill customers, platform: QuickBooks Online, platform_edition: US (en-US) help article, updated 8/3/2026, effective_from: 2026-08-03, conditions: manual application against an unpaid invoice)_ `CG-MCE-038#S26`
> “In the Payment column of the unpaid invoice, enter how much credit you want to apply.” — [Intuit Inc. — Create and apply credit memos or delayed credits in QuickBooks Online](https://quickbooks.intuit.com/learn-support/en-us/help-article/customer-refunds-credits/create-apply-credit-memos-delayed-credits-online/L5kne9EiI_US_en_US), 2026-08-03; Step 2: Apply your credit to an invoice — Apply credit memos, step 7. Verified 2026-09-09.
_Partly established. Established: The whole-sale case of reversal (S19, S22); The partial case of reversal (S05, S19, S26). Missing: How a partial reversal leaves the remainder of the original invoice standing and still collectible._
_Required authority: authoritative professional or accounting standard, official platform documentation. Highest achieved: high quality professional secondary reference, official platform documentation._
## Unpaid, part paid or already paid: how the reversal settles the account
- See above: Where the buyer has not yet paid, the buyer can use the credit memo as a partial offset against its invoice-based payment to the seller. ([CG-MCE-038#S05](#s-CG-MCE-038-S05))
- See above: Where the buyer has already paid the invoice in full, the buyer has the option of either offsetting a future payment with the credit memo or using it as the basis for demanding a cash payment. ([CG-MCE-038#S06](#s-CG-MCE-038-S06))
- The seller records a credit memo as a reduction of its accounts receivable balance, and the buyer records it as a reduction of its accounts payable balance. _(jurisdiction: Not stated in the document; general commercial practice described by a US-based publisher (AccountingTools, Inc.), entity_scope: Seller and buyer to the credit memo, accounting_basis: accrual bookkeeping (accounts receivable / accounts payable balances))_ `CG-MCE-038#S08`
> “The seller records the credit memo as a reduction of its accounts receivable balance, while the buyer records it as a reduction in its accounts payable balance.” — [AccountingTools, Inc. (author Steven Bragg) — Credit memo definition](https://www.accountingtools.com/articles/credit-memo), 2026-03-09; Heading "Accounting for a Credit Memo", first sentence. Verified 2026-09-09.
- See above: In QuickBooks Online, a credit memo is sent to a customer to reduce how much they owe after a return, a discount or a billing error; it keeps the customer's accounts receivable balance correct but does not alter the original invoice records. ([CG-MCE-038#S17](#s-CG-MCE-038-S17))
- Where there are no unpaid invoices for the customer, the credit memo's status is Unapplied and the customer's balance is negative. _(jurisdiction: United States (QuickBooks Online US English edition help article), entity_scope: Businesses using QuickBooks Online to bill customers, platform: QuickBooks Online, platform_edition: US (en-US) help article, updated 8/3/2026, effective_from: 2026-08-03, conditions: stated in the section describing the Automatically apply credits setting turned on; no unpaid invoices exist for the customer)_ `CG-MCE-038#S23`
> “If there are no unpaid invoices, the credit memo’s status is Unapplied , and your customer’s balance is negative.” — [Intuit Inc. — Create and apply credit memos or delayed credits in QuickBooks Online](https://quickbooks.intuit.com/learn-support/en-us/help-article/customer-refunds-credits/create-apply-credit-memos-delayed-credits-online/L5kne9EiI_US_en_US), 2026-08-03; How does the automatically apply credits setting work?. Verified 2026-09-09.
- When credits are not applied, the Customer Balance Detail report shows both the invoice and the credit memo as having open balances, and both also show as Open on the Customer and Sales transaction pages. _(jurisdiction: United States (QuickBooks Online US English edition help article), entity_scope: Businesses using QuickBooks Online to bill customers, platform: QuickBooks Online, platform_edition: US (en-US) help article, updated 8/3/2026, effective_from: 2026-08-03, conditions: credits have not been applied)_ `CG-MCE-038#S24`
> “If you don’t apply any credits, the Customer Balance Detail report shows that both the invoice and the credit memo have open balances. They also show as Open on the Customer and Sales transaction pages.” — [Intuit Inc. — Create and apply credit memos or delayed credits in QuickBooks Online](https://quickbooks.intuit.com/learn-support/en-us/help-article/customer-refunds-credits/create-apply-credit-memos-delayed-credits-online/L5kne9EiI_US_en_US), 2026-08-03; How does the automatically apply credits setting work?. Verified 2026-09-09.
- In QuickBooks Online the money actually returned to the customer is recorded by creating an expense transaction, as the step after the credit memo. _(jurisdiction: United States, entity_scope: QuickBooks Online users refunding a paid invoice, platform: QuickBooks Online, platform_edition: US (en-US) help article, updated 8/5/2026, effective_from: 2026-08-05)_ `CG-MCE-038#S33`
> “Next, create an expense to record the money you are refunding to the customer.” — [Intuit Inc. — Refund your customer for a paid invoice in QuickBooks Online](https://quickbooks.intuit.com/learn-support/en-us/help-article/customer-refunds-credits/record-customer-refund-quickbooks-online/L5PbCkJk8_US_en_US), 2026-08-05; Section "Create the refund expense", lead sentence. Verified 2026-09-09.
- Once the transactions are linked, the customer's account shows the credit memo as paid with the refund expense recorded, and the article states the accounts receivable and bank account balances will then be correct. _(jurisdiction: United States, entity_scope: QuickBooks Online users who completed the credit memo, expense and linking steps, platform: QuickBooks Online, platform_edition: US (en-US) help article, updated 8/5/2026, effective_from: 2026-08-05, conditions: all three steps completed and linked)_ `CG-MCE-038#S36`
> “After linking the transactions, your customer's account will show the credit memo as paid, and the refund expense is recorded. Your accounts receivable and bank account balances will be correct.” — [Intuit Inc. — Refund your customer for a paid invoice in QuickBooks Online](https://quickbooks.intuit.com/learn-support/en-us/help-article/customer-refunds-credits/record-customer-refund-quickbooks-online/L5PbCkJk8_US_en_US), 2026-08-05; Section "Results". Verified 2026-09-09.
_Partly established. Established: How the reversing record settles against an invoice that is still unpaid (S05, S17); What happens instead when the invoice was already paid, so that money must go back or a credit remains available (S06, S23, S33). Missing: That the customer's balance ends correct in both cases._
_Required authority: authoritative professional or accounting standard, official platform documentation. Highest achieved: high quality professional secondary reference, official platform documentation._
## What your accounting software actually does with credits, refunds, voids and deletions
- See above: In QuickBooks Online, voiding a transaction keeps a record of that transaction in the books, and that retained record does not affect totals. ([CG-MCE-038#S01](#s-CG-MCE-038-S01))
- In QuickBooks Online, a voided transaction is set to zero and is displayed as void in the user's records. _(jurisdiction: United States (en-US QuickBooks Online help edition), entity_scope: Businesses using QuickBooks Online, platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced, Plus, Simple Start, Essentials, Free, Lite, Intuit Enterprise Suite, QuickBooks Solopreneur Plus, effective_from: 2026-09-07 (article last updated))_ `CG-MCE-038#S02`
> “Voided transactions are zero and show as void in your records.” — [Intuit Inc. — Void or delete transactions](https://quickbooks.intuit.com/learn-support/en-us/help-article/list-management/void-delete-transactions-quickbooks-online/L5sZV8GYh_US_en_US), 2026-09-07; Void or delete transactions - "Important :" bullet list, second bullet. Verified 2026-09-09.
- See above: In QuickBooks Online, deleting a transaction removes it everywhere except the audit log, which retains it. ([CG-MCE-038#S03](#s-CG-MCE-038-S03))
- See above: In QuickBooks Online, a credit memo is sent to a customer to reduce how much they owe after a return, a discount or a billing error; it keeps the customer's accounts receivable balance correct but does not alter the original invoice records. ([CG-MCE-038#S17](#s-CG-MCE-038-S17))
- QuickBooks Online offers two credit records: a credit memo, which can reduce the customer's current balance right away, and a delayed credit, which the customer can use later. _(jurisdiction: United States (QuickBooks Online US English edition help article), entity_scope: Businesses using QuickBooks Online to bill customers, platform: QuickBooks Online, platform_edition: US (en-US) help article, updated 8/3/2026, effective_from: 2026-08-03)_ `CG-MCE-038#S18`
> “You can send a customer a credit memo to reduce their current balance right away, or send them a delayed credit they can use later.” — [Intuit Inc. — Create and apply credit memos or delayed credits in QuickBooks Online](https://quickbooks.intuit.com/learn-support/en-us/help-article/customer-refunds-credits/create-apply-credit-memos-delayed-credits-online/L5kne9EiI_US_en_US), 2026-08-03; Article introduction, second paragraph. Verified 2026-09-09.
- See above: A credit memo can be used as payment for an invoice either in part or in full. ([CG-MCE-038#S19](#s-CG-MCE-038-S19))
- A credit memo affects sales reports whether or not it has been applied to an invoice. _(jurisdiction: United States (QuickBooks Online US English edition help article), entity_scope: Businesses using QuickBooks Online to bill customers, platform: QuickBooks Online, platform_edition: US (en-US) help article, updated 8/3/2026, effective_from: 2026-08-03)_ `CG-MCE-038#S20`
> “Credit memos impact sales reports, even if you don't apply them to invoices.” — [Intuit Inc. — Create and apply credit memos or delayed credits in QuickBooks Online](https://quickbooks.intuit.com/learn-support/en-us/help-article/customer-refunds-credits/create-apply-credit-memos-delayed-credits-online/L5kne9EiI_US_en_US), 2026-08-03; Learn the differences between credit memos and delayed credits — Credit memo. Verified 2026-09-09.
- Delayed credits do not affect sales reports until they are applied to invoices, in contrast to credit memos. _(jurisdiction: United States (QuickBooks Online US English edition help article), entity_scope: Businesses using QuickBooks Online to bill customers, platform: QuickBooks Online, platform_edition: US (en-US) help article, updated 8/3/2026, effective_from: 2026-08-03)_ `CG-MCE-038#S21`
> “Unlike credit memos, delayed credits don't impact sales reports until they’re applied to invoices.” — [Intuit Inc. — Create and apply credit memos or delayed credits in QuickBooks Online](https://quickbooks.intuit.com/learn-support/en-us/help-article/customer-refunds-credits/create-apply-credit-memos-delayed-credits-online/L5kne9EiI_US_en_US), 2026-08-03; Learn the differences between credit memos and delayed credits — Delayed credit. Verified 2026-09-09.
- With the 'Automatically apply credits' setting on, QuickBooks applies the credit to the oldest unpaid invoice and closes that invoice if the credit matches or exceeds its remaining balance, then applies any additional credit to the next oldest unpaid invoice until all unpaid invoices are paid. _(jurisdiction: United States (QuickBooks Online US English edition help article), entity_scope: Businesses using QuickBooks Online to bill customers, platform: QuickBooks Online, platform_edition: US (en-US) help article, updated 8/3/2026, effective_from: 2026-08-03, conditions: the Automatically apply credits setting is turned on)_ `CG-MCE-038#S22`
> “When you turn this setting on, QuickBooks applies the credit to the oldest unpaid invoice and if the credit matches or exceeds the remaining balance, closes the invoice. Any additional credit is applied to the next oldest unpaid invoice until all unpaid invoices are paid.” — [Intuit Inc. — Create and apply credit memos or delayed credits in QuickBooks Online](https://quickbooks.intuit.com/learn-support/en-us/help-article/customer-refunds-credits/create-apply-credit-memos-delayed-credits-online/L5kne9EiI_US_en_US), 2026-08-03; How does the automatically apply credits setting work?. Verified 2026-09-09.
- See above: Where there are no unpaid invoices for the customer, the credit memo's status is Unapplied and the customer's balance is negative. ([CG-MCE-038#S23](#s-CG-MCE-038-S23))
- See above: When credits are not applied, the Customer Balance Detail report shows both the invoice and the credit memo as having open balances, and both also show as Open on the Customer and Sales transaction pages. ([CG-MCE-038#S24](#s-CG-MCE-038-S24))
- See above: The amount of credit applied to an unpaid invoice is entered by the user in the Payment column of that invoice, so a chosen amount rather than necessarily the whole credit is applied. ([CG-MCE-038#S26](#s-CG-MCE-038-S26))
- Adding a delayed credit to an invoice dated in a previous accounting period will affect that period's balances. _(jurisdiction: United States (QuickBooks Online US English edition help article), entity_scope: Businesses using QuickBooks Online to bill customers, platform: QuickBooks Online, platform_edition: US (en-US) help article, updated 8/3/2026, effective_from: 2026-08-03, conditions: the invoice is from a previous accounting period)_ `CG-MCE-038#S28`
> “Remember, adding a delayed credit to an invoice from a previous accounting period will affect the balances for that period.” — [Intuit Inc. — Create and apply credit memos or delayed credits in QuickBooks Online](https://quickbooks.intuit.com/learn-support/en-us/help-article/customer-refunds-credits/create-apply-credit-memos-delayed-credits-online/L5kne9EiI_US_en_US), 2026-08-03; Step 2: Apply your credit to an invoice — Apply delayed credits (note before the steps). Verified 2026-09-09.
- See above: QuickBooks Online states that if you have QuickBooks Payments, you can refund a customer who has already paid an invoice by using a credit memo. ([CG-MCE-038#S29](#s-CG-MCE-038-S29))
- See above: The article directs the credit-memo-plus-expense method to refunds involving a lost package or the Accounts Receivable (A/R) account, and says to create a refund receipt instead if you want to refund individual items or services. ([CG-MCE-038#S30](#s-CG-MCE-038-S30))
- When the credit memo covers an inventory item, QuickBooks adds that item back to inventory; if the item is defective or should not be added back, an inventory adjustment is needed. _(jurisdiction: United States, entity_scope: QuickBooks Online users refunding an inventory item, platform: QuickBooks Online, platform_edition: US (en-US) help article, updated 8/5/2026, effective_from: 2026-08-05, conditions: the refunded line is an inventory item)_ `CG-MCE-038#S32`
> “Note : If you are refunding an inventory item, QuickBooks adds it back to your inventory. If the item is defective or you don't want to add it back, you will need to make an inventory adjustment .” — [Intuit Inc. — Refund your customer for a paid invoice in QuickBooks Online](https://quickbooks.intuit.com/learn-support/en-us/help-article/customer-refunds-credits/record-customer-refund-quickbooks-online/L5PbCkJk8_US_en_US), 2026-08-05; Section "Create a credit memo", Note following step 6. Verified 2026-09-09.
- See above: In QuickBooks Online the money actually returned to the customer is recorded by creating an expense transaction, as the step after the credit memo. ([CG-MCE-038#S33](#s-CG-MCE-038-S33))
- The credit memo and the refund expense are linked as the final step, which is what shows that the credit has been refunded rather than left outstanding. _(jurisdiction: United States, entity_scope: QuickBooks Online users refunding a paid invoice, platform: QuickBooks Online, platform_edition: US (en-US) help article, updated 8/5/2026, effective_from: 2026-08-05)_ `CG-MCE-038#S35`
> “Finally, link the credit memo and the expense to show the credit has been refunded.” — [Intuit Inc. — Refund your customer for a paid invoice in QuickBooks Online](https://quickbooks.intuit.com/learn-support/en-us/help-article/customer-refunds-credits/record-customer-refund-quickbooks-online/L5PbCkJk8_US_en_US), 2026-08-05; Section "Link the refund to the credit memo", lead sentence. Verified 2026-09-09.
- See above: Once the transactions are linked, the customer's account shows the credit memo as paid with the refund expense recorded, and the article states the accounts receivable and bank account balances will then be correct. ([CG-MCE-038#S36](#s-CG-MCE-038-S36))
- Zoho Books describes a Credit Note as a document a vendor issues to a customer when goods are returned after a sale, created for the value of the goods returned, and gives damaged or unsatisfactory goods as example reasons ("reasons like"), not an exhaustive list. _(jurisdiction: United States (Zoho Books US-EN help edition; the page lists separate country editions), entity_scope: Users of Zoho Books, platform: Zoho Books, platform_edition: US-EN help edition, retrieved 2026-09-08; page lists availability on Free, Standard, Professional, Premium, Elite and Ultimate plans, conditions: descriptive definition of the document type as used in Zoho Books, not a recognition or measurement rule)_ `CG-MCE-038#S37`
> “A Credit Note is a document issued by a vendor to a customer when goods are returned to the vendor after a sale. This can happen due to reasons like the goods being damaged or not satisfactory. The credit note is created for the value of the goods returned.” — [Zoho Corporation (Zoho Books US help) — Introduction - Credit Note | Help | Zoho Books](https://www.zoho.com/us/books/help/credit-note/), Zoho Books help, US-EN edition (page offers separate country editions incl. Australia, India, UK, United States, Global); available on Free, Standard, Professional, Premium, Elite and Ultimate plans; Introduction - Credit Note — opening paragraph, above the 'Create Credit Note' heading. Verified 2026-09-09.
_Not established from an authoritative source._
## What the reversal does to the revenue you already recorded
- "Sales returns and allowances" is a deduction from sales that shows the sale price of goods customers returned, together with discounts customers took to keep defective goods. _(jurisdiction: US (US publisher of US CPE material; the article states no other jurisdiction), entity_scope: Businesses selling goods to customers, conditions: Definitional statement, not a recognition requirement)_ `CG-MCE-038#S13`
> “Sales returns and allowances is a deduction from sales that shows the sale price of goods returned by customers , as well as discounts taken by them to retain defective goods.” — [AccountingTools, Inc. — Sales returns and allowances definition](https://www.accountingtools.com/articles/sales-returns-and-allowances), 2026-08-25; Heading "What is Sales Returns and Allowances?", first sentence. Verified 2026-09-09.
- Sales returns and allowances appears as an income statement line item presented as a subtraction from gross sales, intended to reduce sales by the amount of customer product returns and of sales allowances granted. _(jurisdiction: US (US publisher of US CPE material; the article states no other jurisdiction), entity_scope: Businesses presenting an income statement with a gross sales line item, conditions: Presentation statement only; the article states no period-allocation or timing rule)_ `CG-MCE-038#S14`
> “Sales returns and allowances is a line item appearing in the income statement . This line item is presented as a subtraction from the gross sales line item, and is intended to reduce sales by the amount of product returns from customers and sales allowances granted.” — [AccountingTools, Inc. — Sales returns and allowances definition](https://www.accountingtools.com/articles/sales-returns-and-allowances), 2026-08-25; Heading "Presentation of Sales Returns and Allowances", first two sentences. Verified 2026-09-09.
- In the income statement the sales returns and allowances line item is followed by a net sales line item, calculated by adding gross sales and the negative sales returns and allowances amount. _(jurisdiction: US (US publisher of US CPE material; the article states no other jurisdiction), entity_scope: Businesses presenting an income statement with gross sales and net sales line items)_ `CG-MCE-038#S15`
> “It is followed in the income statement by a net sales line item, which is a calculation that adds together the gross sales line item and the negative amount in the sales returns and allowances line item.” — [AccountingTools, Inc. — Sales returns and allowances definition](https://www.accountingtools.com/articles/sales-returns-and-allowances), 2026-08-25; Heading "Presentation of Sales Returns and Allowances", third sentence. Verified 2026-09-09.
- See above: A credit memo affects sales reports whether or not it has been applied to an invoice. ([CG-MCE-038#S20](#s-CG-MCE-038-S20))
- See above: Delayed credits do not affect sales reports until they are applied to invoices, in contrast to credit memos. ([CG-MCE-038#S21](#s-CG-MCE-038-S21))
_Partly established. Established: What the reversal does to revenue previously recognised (S13, S14). Missing: In which period the reduction is reflected._
_Required authority: authoritative professional or accounting standard. Highest achieved: high quality professional secondary reference, official platform documentation._
## Which period the reduction in revenue is reflected in
_Partly established. Established: The effect of reversing a recorded sale on revenue previously recognised (S13, S14). Missing: The period in which that reduction is reflected._
_Required authority: authoritative professional or accounting standard. Highest achieved: high quality professional secondary reference, official platform documentation._
## Sales tax you already charged, reported and paid over
- Except as provided in paragraph (2) of subdivision (a), the amount charged for merchandise returned by customers is excluded from the amount on which California sales tax is computed if the full sale price including the portion designated as "sales tax" is refunded in cash or credit and the customer is not required, to obtain the refund or credit, to buy other property at a price greater than the amount charged for the returned property. _(jurisdiction: California, United States, entity_scope: sellers of tangible personal property subject to California sales and use tax, conditions: full sale price including the portion designated as sales tax refunded in cash or credit; customer not required to purchase other property at a greater price to obtain the refund or credit; subject to the exception in subdivision (a)(2))_ `CG-MCE-038#S41`
> “Except as provided in paragraph (2) of this subdivision, the amount upon which tax is computed does not include the amount charged for merchandise returned by customers if, (1) the full sale price, including that portion designated as "sales tax", is refunded either in cash or credit, and (2) the customer, in order to obtain the refund or credit, is not required to purchase other property at a price greater than the amount charged for the property that is returned.” — [California Department of Tax and Fee Administration — Regulation 1655. Returns, Defects and Replacements.](https://www.cdtfa.ca.gov/lawguides/vol1/sutr/1655.html), 2014-10-01; Regulation 1655, subdivision (a) Returned Merchandise, paragraph (1) In General. Verified 2026-09-09.
_Flagged for professional review — a bookkeeper or accountant should confirm this applies to your situation._
- Refunding or crediting the purchase price less rehandling and restocking costs is deemed to be refund or credit of the entire amount for purposes of the returned-merchandise exclusion. _(jurisdiction: California, United States, entity_scope: sellers of tangible personal property subject to California sales and use tax, conditions: amount withheld is rehandling and restocking costs)_ `CG-MCE-038#S42`
> “Refund or credit of the entire amount is deemed to be given when the purchase price, less rehandling and restocking costs, is refunded or credited to the customer.” — [California Department of Tax and Fee Administration — Regulation 1655. Returns, Defects and Replacements.](https://www.cdtfa.ca.gov/lawguides/vol1/sutr/1655.html), 2014-10-01; Regulation 1655, subdivision (a) Returned Merchandise, paragraph (1) In General. Verified 2026-09-09.
_Flagged for professional review — a bookkeeper or accountant should confirm this applies to your situation._
- Sellers must maintain adequate records documenting the percentage used, and those records may be verified by audit. _(jurisdiction: California, United States, entity_scope: sellers using a percentage for rehandling and restocking withholding)_ `CG-MCE-038#S43`
> “Sellers must maintain adequate records which may be verified by audit, documenting the percentage used.” — [California Department of Tax and Fee Administration — Regulation 1655. Returns, Defects and Replacements.](https://www.cdtfa.ca.gov/lawguides/vol1/sutr/1655.html), 2014-10-01; Regulation 1655, subdivision (a) Returned Merchandise, paragraph (1) In General (second paragraph). Verified 2026-09-09.
_Flagged for professional review — a bookkeeper or accountant should confirm this applies to your situation._
- Amounts that sellers credit or refund to consumers on account of defects in merchandise sold may be excluded from the amount on which California sales tax is computed. _(jurisdiction: California, United States, entity_scope: sellers crediting or refunding consumers for defects in merchandise sold, conditions: credit or refund is on account of defects in the merchandise sold)_ `CG-MCE-038#S44`
> “Amounts credited or refunded by sellers to consumers on account of defects in merchandise sold may be excluded from the amount on which tax is computed.” — [California Department of Tax and Fee Administration — Regulation 1655. Returns, Defects and Replacements.](https://www.cdtfa.ca.gov/lawguides/vol1/sutr/1655.html), 2014-10-01; Regulation 1655, subdivision (b) Defective Merchandise, paragraph (1) In General. Verified 2026-09-09.
_Flagged for professional review — a bookkeeper or accountant should confirm this applies to your situation._
- A person registered for New York State sales tax purposes can claim a credit for sales tax that was overpaid, paid by mistake, or collected and then repaid to customers. _(jurisdiction: United States - New York State (NYS sales tax), entity_scope: persons registered for sales tax purposes in New York State, effective_from: 2014-06-13, conditions: registered for sales tax purposes; tax was overpaid, paid by mistake, or collected but then repaid to the customer)_ `CG-MCE-038#S45`
> “If you are registered for sales tax purposes, you can claim a credit for sales tax you overpaid, paid by mistake, or collected but then repaid to your customers.” — [New York State Department of Taxation and Finance — Tax Bulletin ST-810 (TB-ST-810), Sales Tax Credits](https://www.tax.ny.gov/pubs_and_bulls/tg_bulletins/st/sales_tax_credits.htm), 2026-02-24; TB-ST-810, section "Introduction". Verified 2026-09-09.
_Flagged for professional review — a bookkeeper or accountant should confirm this applies to your situation._
- As an alternative to claiming a credit, the taxpayer may instead apply for a refund of the sales tax. _(jurisdiction: United States - New York State (NYS sales tax), entity_scope: persons registered for New York State sales tax purposes, effective_from: 2014-06-13, conditions: at the taxpayer's preference)_ `CG-MCE-038#S46`
> “If you prefer, you may apply for a refund of the sales tax instead of claiming a credit.” — [New York State Department of Taxation and Finance — Tax Bulletin ST-810 (TB-ST-810), Sales Tax Credits](https://www.tax.ny.gov/pubs_and_bulls/tg_bulletins/st/sales_tax_credits.htm), 2026-02-24; TB-ST-810, section "Introduction". Verified 2026-09-09.
_Flagged for professional review — a bookkeeper or accountant should confirm this applies to your situation._
- The bulletin gives as one example (in an open list) of when a credit may be claimed: the seller gave the customer a credit or refund of sales tax collected because the customer returned the item or did not use the service, and the seller had remitted that tax with a prior return. _(jurisdiction: United States - New York State (NYS sales tax), entity_scope: registered New York State sales tax vendors, effective_from: 2014-06-13, conditions: presented as an example, not an exhaustive condition list; customer returned the item or did not use the service; tax was remitted with a prior return)_ `CG-MCE-038#S47`
> “You gave a customer a credit or refund of sales tax collected on an item or service because the customer returned the item or did not use the service, and you remitted the tax to the Tax Department with a prior return.” — [New York State Department of Taxation and Finance — Tax Bulletin ST-810 (TB-ST-810), Sales Tax Credits](https://www.tax.ny.gov/pubs_and_bulls/tg_bulletins/st/sales_tax_credits.htm), 2026-02-24; TB-ST-810, section "How to apply for a sales tax credit", first bullet under "Some examples of when you may claim a credit are:". Verified 2026-09-09.
_Flagged for professional review — a bookkeeper or accountant should confirm this applies to your situation._
- Copies of receipts or invoices showing the credit issued together with the amount of sales tax returned to the customer after the tax was remitted are given as an example of supporting documentation for a credit claim. _(jurisdiction: United States - New York State (NYS sales tax), entity_scope: claimants of New York State sales tax credits, effective_from: 2014-06-13, conditions: given as an example in an open list of documents)_ `CG-MCE-038#S48`
> “copies of the receipts or invoices showing the credit issued with the amount of the sales tax that was returned to the customer after you remitted the tax to the Tax Department” — [New York State Department of Taxation and Finance — Tax Bulletin ST-810 (TB-ST-810), Sales Tax Credits](https://www.tax.ny.gov/pubs_and_bulls/tg_bulletins/st/sales_tax_credits.htm), 2026-02-24; TB-ST-810, section "Documentation required", first bullet under "Some examples of these documents include:". Verified 2026-09-09.
_Flagged for professional review — a bookkeeper or accountant should confirm this applies to your situation._
- Where credits cannot be assigned to a specific jurisdiction, the credit cannot be claimed on the Web File or paper return; instead a refund is applied for on Form AU-11 with documentation allowing the Department to determine the correct jurisdiction. _(jurisdiction: United States - New York State (NYS state and local sales tax jurisdictions), entity_scope: claimants who cannot assign credits to a specific jurisdiction, effective_from: 2014-06-13, conditions: credits cannot be assigned to a specific jurisdiction)_ `CG-MCE-038#S49`
> “If you cannot assign credits to a specific jurisdiction, you cannot claim the credit on your Web File or paper return. Apply for a refund using Form AU-11 , Application for Credit or Refund of Sales or Use Tax , and provide documentation that will allow us to determine the correct jurisdiction.” — [New York State Department of Taxation and Finance — Tax Bulletin ST-810 (TB-ST-810), Sales Tax Credits](https://www.tax.ny.gov/pubs_and_bulls/tg_bulletins/st/sales_tax_credits.htm), 2026-02-24; TB-ST-810, section "Special circumstances". Verified 2026-09-09.
_Flagged for professional review — a bookkeeper or accountant should confirm this applies to your situation._
- A sales tax credit must be claimed within three years from the date the sales tax return was due, or two years from the date the tax was paid to the Tax Department, whichever is later. _(jurisdiction: United States - New York State (NYS sales tax), entity_scope: claimants of New York State sales tax credits, effective_from: 2014-06-13, conditions: the later of the two periods applies)_ `CG-MCE-038#S50`
> “You must claim your credit within three years from the date the sales tax return was due, or two years from the date the tax was paid to the Tax Department, whichever is later.” — [New York State Department of Taxation and Finance — Tax Bulletin ST-810 (TB-ST-810), Sales Tax Credits](https://www.tax.ny.gov/pubs_and_bulls/tg_bulletins/st/sales_tax_credits.htm), 2026-02-24; TB-ST-810, section "Deadline for filing". Verified 2026-09-09.
_Flagged for professional review — a bookkeeper or accountant should confirm this applies to your situation._
- The bulletin states that its information does not cover every situation and is not intended to replace the law or change its meaning. _(jurisdiction: United States - New York State (NYS sales tax), entity_scope: status of the bulletin itself, effective_from: 2014-06-13)_ `CG-MCE-038#S51`
> “The information provided in this document does not cover every situation and is not intended to replace the law or change its meaning.” — [New York State Department of Taxation and Finance — Tax Bulletin ST-810 (TB-ST-810), Sales Tax Credits](https://www.tax.ny.gov/pubs_and_bulls/tg_bulletins/st/sales_tax_credits.htm), 2026-02-24; TB-ST-810, "Note" following the "Contact us" section. Verified 2026-09-09.
_Flagged for professional review — a bookkeeper or accountant should confirm this applies to your situation._
_Partly established. Established: What happens to sales tax charged and already reported on the original sale (S41, S44, S45, S47). Missing: How the business determines whether and how an adjustment is available to it._
## When a state lets a seller adjust tax on a sale that is later credited or refunded
- See above: Except as provided in paragraph (2) of subdivision (a), the amount charged for merchandise returned by customers is excluded from the amount on which California sales tax is computed if the full sale price including the portion designated as "sales tax" is refunded in cash or credit and the customer is not required, to obtain the refund or credit, to buy other property at a price greater than the amount charged for the returned property. ([CG-MCE-038#S41](#s-CG-MCE-038-S41))
- See above: Refunding or crediting the purchase price less rehandling and restocking costs is deemed to be refund or credit of the entire amount for purposes of the returned-merchandise exclusion. ([CG-MCE-038#S42](#s-CG-MCE-038-S42))
- See above: Sellers must maintain adequate records documenting the percentage used, and those records may be verified by audit. ([CG-MCE-038#S43](#s-CG-MCE-038-S43))
- See above: Amounts that sellers credit or refund to consumers on account of defects in merchandise sold may be excluded from the amount on which California sales tax is computed. ([CG-MCE-038#S44](#s-CG-MCE-038-S44))
- See above: A person registered for New York State sales tax purposes can claim a credit for sales tax that was overpaid, paid by mistake, or collected and then repaid to customers. ([CG-MCE-038#S45](#s-CG-MCE-038-S45))
- See above: As an alternative to claiming a credit, the taxpayer may instead apply for a refund of the sales tax. ([CG-MCE-038#S46](#s-CG-MCE-038-S46))
- See above: The bulletin gives as one example (in an open list) of when a credit may be claimed: the seller gave the customer a credit or refund of sales tax collected because the customer returned the item or did not use the service, and the seller had remitted that tax with a prior return. ([CG-MCE-038#S47](#s-CG-MCE-038-S47))
- See above: Where credits cannot be assigned to a specific jurisdiction, the credit cannot be claimed on the Web File or paper return; instead a refund is applied for on Form AU-11 with documentation allowing the Department to determine the correct jurisdiction. ([CG-MCE-038#S49](#s-CG-MCE-038-S49))
- See above: A sales tax credit must be claimed within three years from the date the sales tax return was due, or two years from the date the tax was paid to the Tax Department, whichever is later. ([CG-MCE-038#S50](#s-CG-MCE-038-S50))
_Partly established. Established: Whether sales tax charged, reported and remitted on a sale that is later credited or refunded may be adjusted by the seller (S41, S44, S45, S47). Missing: The conditions on which that adjustment may be made by the seller._
## If the sale sits in a period you have already closed or already reported
- See above: Adding a delayed credit to an invoice dated in a previous accounting period will affect that period's balances. ([CG-MCE-038#S28](#s-CG-MCE-038-S28))
- See above: The bulletin gives as one example (in an open list) of when a credit may be claimed: the seller gave the customer a credit or refund of sales tax collected because the customer returned the item or did not use the service, and the seller had remitted that tax with a prior return. ([CG-MCE-038#S47](#s-CG-MCE-038-S47))
- See above: A sales tax credit must be claimed within three years from the date the sales tax return was due, or two years from the date the tax was paid to the Tax Department, whichever is later. ([CG-MCE-038#S50](#s-CG-MCE-038-S50))
_Not established from an authoritative source._
_Required authority: authoritative professional or accounting standard. Highest achieved: official platform documentation._
## Extra handling for a reversal that reaches a closed or reported period
_Not established from an authoritative source._
_Required authority: authoritative professional or accounting standard. Highest achieved: primary regulator or government._
## The records that back up the cancellation or refund
- Larger credit memos are usually issued only after supervisory approval, because such credits reduce the cash the seller will collect. _(jurisdiction: Not stated in the document; general commercial practice described by a US-based publisher (AccountingTools, Inc.), entity_scope: Sellers issuing larger credit memos, conditions: applies to larger credit memos; stated as usual practice, not an absolute rule)_ `CG-MCE-038#S09`
> “Larger credit memos are usually only issued after they have been approved by a supervisor, since these credits reduce the amount of cash that the seller will collect.” — [AccountingTools, Inc. (author Steven Bragg) — Credit memo definition](https://www.accountingtools.com/articles/credit-memo), 2026-03-09; Heading "Accounting for a Credit Memo", second sentence. Verified 2026-09-09.
- Among the best practices the article lists is recording returns and allowances promptly, documenting them as soon as they occur, because any delay may mean the underlying reasons are forgotten, which can cause later conflicts with customers. _(jurisdiction: US (US publisher of US CPE material; the article states no other jurisdiction), entity_scope: Businesses recording sales returns and allowances, conditions: Presented by the article as a best practice, not a requirement; consequences are hedged ("may mean", "can cause"))_ `CG-MCE-038#S16`
> “Record returns and allowances promptly . Document returns and allowances as soon as they occur. Any delay may mean that the underlying reasons for one of these transactions is forgotten, which can cause conflicts with customers at a later date.” — [AccountingTools, Inc. — Sales returns and allowances definition](https://www.accountingtools.com/articles/sales-returns-and-allowances), 2026-08-25; Heading "Best Practices for Sales Returns and Allowances", second listed best practice. Verified 2026-09-09.
- See above: Copies of receipts or invoices showing the credit issued together with the amount of sales tax returned to the customer after the tax was remitted are given as an example of supporting documentation for a credit claim. ([CG-MCE-038#S48](#s-CG-MCE-038-S48))
_Partly established. Established: The reversing document itself (S04). Missing: The customer's request supporting the cancellation or refund; The authorisation of the decision; What that reversing document must show._
_Required authority: authoritative professional or accounting standard, high quality professional secondary reference. Highest achieved: high quality professional secondary reference, primary regulator or government._
## What the credit document itself should show
- See above: Larger credit memos are usually issued only after supervisory approval, because such credits reduce the cash the seller will collect. ([CG-MCE-038#S09](#s-CG-MCE-038-S09))
- See above: Among the best practices the article lists is recording returns and allowances promptly, documenting them as soon as they occur, because any delay may mean the underlying reasons are forgotten, which can cause later conflicts with customers. ([CG-MCE-038#S16](#s-CG-MCE-038-S16))
_Not established from an authoritative source._
## Not yet fully established from an authoritative source
- Establish how a recorded customer sale is reversed in whole or in part through a credit or a refund record, and how each settles against the customer's balance depending on whether the invoice was paid. _(partly established; below the required authority class)_
- Establish the expectation that accounting records are corrected by reversing or correcting records rather than by deleting or altering originals, and what that practice preserves. _(not established; below the required authority class)_
- Establish how mainstream small-business accounting systems represent a customer credit, a refund and their application to an invoice, and what those systems do when an invoice is deleted or voided instead. _(not established)_
- Establish the effect of reversing a recorded sale on revenue previously recognised and on the period in which that reduction is reflected. _(partly established; below the required authority class)_
- Establish whether and on what conditions sales tax charged, reported and remitted on a sale that is later credited or refunded may be adjusted by the seller. _(partly established)_
- Establish what additional handling applies when the sale being reversed was recorded in a period that has already been closed or reported. _(not established; below the required authority class)_
- Establish what documentation supports a customer credit or refund and what the reversing document itself must show to stand as the record of the reversal. _(not established)_
- Establish the rule that an already-recorded sale is undone by posting a new reversing record, never by deleting the invoice or editing its amounts, and explain concretely what deletion or editing destroys — the record of what was billed, the continuity of the numbering, and the integrity of a period that may already have been reported. _(not established; below the required authority class)_
- Distinguish a credit that reduces what the customer owes from a refund that returns money to the customer, and give the criterion that decides which the situation calls for, including the case where part is credited and part refunded. _(partly established; below the required authority class)_
- Explain the whole-sale and the partial cases, showing how a partial reversal leaves the remainder of the original invoice standing and still collectible. _(partly established; below the required authority class)_
- Explain how the reversing record settles against an invoice that is still unpaid, and what happens instead when the invoice was already paid so that money must go back or a credit remains available, ensuring the customer's balance ends correct in both cases. _(partly established; below the required authority class)_
- Establish what the reversal does to revenue previously recognised and in which period the reduction is reflected. _(partly established; below the required authority class)_
- Establish what happens to sales tax charged and already reported on the original sale, and set out how the business determines whether and how an adjustment is available to it. _(partly established)_
- Distinguish reversing a sale recorded in the current open period from reversing one recorded in a period already closed or already reported, and state what must be checked before posting in the second case. _(not established; below the required authority class)_
- Identify the records that must support the cancellation or refund — the customer's request, the authorisation of the decision, and the reversing document itself — and what that document must show to stand as the record of the reversal. _(partly established; below the required authority class)_
## Related
- [My accounts receivable shows invoices as unpaid that customers already paid — how do I find and fix the wrong balances?](https://uppago.com/resources/my-accounts-receivable-shows-invoices-as-unpaid-that-customers-already-paid-how)
- [A customer disputed a card payment and the processor pulled the money back — how do I record the chargeback and what records do I need?](https://uppago.com/resources/a-customer-disputed-a-card-payment-and-the-processor-pulled-the-money-back-how)
_Reference date 2026-09-07. Statements are quoted verbatim from their sources; scope and verification dates are shown on each._