JE-19 Jun 2026Manualposted
Issue the credit note.
| Account | Dimensions | Debit | Credit |
|---|---|---|---|
| 4100 Sales returns and allowances | 450 US Dollar | ||
| 1100 Accounts receivable | 450 US Dollar | ||
| Totals | 450 US Dollar | 450 US Dollar | |
Balanced.
Journal entry for a customer refund
To refund a customer for an invoice already paid, issue a credit note — debit Sales returns and allowances, credit Accounts receivable — then pay the refund: debit Accounts receivable, credit Cash.
- Refund
- $450
- Entity
- Illustrative company
- Basis
- Accrual
- Currency
- USD
- Period
- June 2026
The worked example
A customer returns part of a paid order and is refunded $450. The company issues a credit note and pays it back to the customer's card the same week.
Transaction · June 9, 2026
Transaction · June 11, 2026
JE-211 Jun 2026Manualposted
Pay the refund.
Journal entry JE-2, 2 lines Account Dimensions Debit Credit 1100 Accounts receivable 450 US Dollar 1000 Cash 450 US Dollar Totals 450 US Dollar 450 US Dollar Balanced.
What the entries do to the accounts
Every entry above posted to the ledger, starting from zero balances: the net debit or credit each account is left with. Debits equal credits, so the books still balance.
| Account | Debit | Credit |
|---|---|---|
| 1000 Cash | 450 US Dollar | |
| 4100 Sales returns and allowances | 450 US Dollar | |
| Totals | 450 US Dollar | 450 US Dollar |
One account nets to zero across the entries and is not shown.
Why it is booked this way
A refund undoes part of a sale, so it reduces revenue — through a contra-revenue account so gross sales and returns stay separately visible.
Routing it through the customer's receivable account, with a credit note and then the cash, keeps the customer ledger complete: the document explains the payment.
Common mistakes
- Refunding from the bank without a credit note, so the customer's account shows an unexplained debit.
- Booking refunds as an operating expense instead of against revenue.
Questions
- Why not debit Revenue directly?
- A contra-revenue account keeps gross sales visible on the P&L with returns shown as a deduction. Debiting revenue directly gives the same net figure but loses the information.
- Is a refund the same as a chargeback?
- A refund is the company's decision; a chargeback is the card network reversing a payment at the cardholder's request, usually with a fee. Both reduce revenue, but a chargeback also needs the dispute fee and the processor's reserve booked.
Terms on this page
Work with this entry
The tool that computes the schedule, the concept behind it, the entries that come next and the components that render them.
- Chargebacks, explained for foundersA chargeback reverses a card payment: the cardholder disputes it and the amount plus a fee leaves your processor balance until the bank decides.Doc
- Journal entry for a Stripe payoutBook charges gross: debit Stripe clearing and credit Revenue for every charge, debit Sales returns and allowances and credit Stripe clearing for refunds. When the payout lands, debit Cash for the payout and Merchant fees for the fees, and credit Stripe clearing — which should then be zero.Entry
- Journal entry for a sale on accountFor a sale on credit, debit Accounts receivable and credit Revenue for the price; under a perpetual inventory system also debit Cost of goods sold and credit Inventory for what the goods cost. When the customer pays, debit Cash and credit Accounts receivable.Entry
- Journal entry for writing off accounts receivableTo write off an uncollectible invoice under the allowance method, debit Allowance for credit losses and credit Accounts receivable. If the customer later pays, reinstate the receivable (debit Accounts receivable, credit Allowance) and record the cash.Entry
- InvoiceCardInvoice summary with aging state.Component
- JournalEntryDebit and credit as two columns. No signed-column variant.Component
An illustrative company, not anyone’s real books. Every figure on this page is computed from the inputs in the example and posted by the same functions as the journal entry balancer. General information for US companies under US GAAP, not accounting or tax advice.