I’m due a refund for the purchase of goods from a supplier who failed to deliver, despite receiving the payment from me in advance. I have an idea the supplier has gone bust and will not be able to process the refund but, since the payment was made through PayPal, there is a chance I may get at least a partial refund through that route. My question is how to account for that in Quickfile? I’m not sure a credit note will expire into a bad debt if the refund never materialises? And I (obviously) won’t be using the supplier again for future payments, so could never use up the credit if assigned to that supplier. So I’m thinking I need a separate account to hold the (potential) credit until it is repaid or becomes a hopeless case and moves to bad debt - but not sure how to achieve that in Quickfile.
Hi @CharlotteH
Have you been issued anything relating to the refund as of yet, such as a credit note?
Hi Mathew.
No. So far all I’ve done is raised a case with PayPal against the seller. That’s “pending response from seller”.
I think your problem is that you have raised a credit note before actually receiving a refund. That’s not how it works. You recieve a refund then create a credit note. No refund no credit note, bad debt would be then allocated to the purchase receipt
No, I haven’t raised a credit note. Just the purchase is in the books at the moment. I was pretty sure a credit note in this situation isn’t the correct approach, which is why I’m asking what to do. You say “bad debt would then be allocated to the purchase receipt”. How would that be achieved?
Sorry. I completely read your question wrong. I was taking the view that it was income received which would never be repaid. Please disregard my last comment.
In reference to your actual query. In my opinion you do nothing. Continue to treat that payment as payment for goods and claim it against your income to reduce your tax.
If at any point in the future a refund is actually received then you would allocate it with a credit note and it will reverse the expense and increase the profit accordingly thereby effectively increasing your profit so you pay back the tax you saved.
OK, thanks Paul. I think your ‘do nothing’ suggestion is the best way to deal with it 
Nice and simple!
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