Hi ProfessionalChoiceSolutions!
Good to see you again here. Allow me to assist you in tracking the security deposits in QuickBooks Online.
I reviewed this thread and here's what I can suggest.
First, please review the deposit service item that your previous bookkeeper created. If they selected a liability account as an income account, then the bookkeeper was correct. The funds will be posted to the selected liability account when they create an invoice or sales receipt.
Follow these steps on how to verify:
- Go to the Sales menu and select Products and services.
- Find the deposit service item, then click Edit.
- Review the Income account and make sure it is a liability. If not, you can change it, then make sure to select the Also update this account in historical transactions box to update the old transactions with this item.
- Tap Save and close.
Please check this link on how to properly track the advance payments or deposit in QuickBooks Online: Record a retainer or deposit.
Second, you can simply create a check to record the refund affecting the liability account used in the Deposit service item. Go to the + New button, then select Check. From the Category details section, select the liability account, select the customer as the Payee, enter the amount of the refund and other details needed, then tap Save and close.
You don't need a credit memo or refund receipt for this. Creating one will only result in an incorrect balance. This is because the check you created already decreases the liability balance. Since you created one, open the credit memo or refund receipt, click the More at the footer section, then select Delete.
Now, you can pull up the Transaction List by Customer report from the Reports menu. From there, you'll see all transactions for this customer including the refunds you created.
Also, here's the article if you need detailed steps in reconciling your accounts: Reconcile an account in QuickBooks Online.
Please let me know if you have further concerns with this. I'll be happy to help you!
