Thanks, Christine. As I mentioned, I followed the steps recommended by QBO, creating an expense for the refund, using "Accounts receivable" as the account, then processing a payment to connect the overpayment to the refund amount.

I am attaching some screenshots to show you the problem with the unapplied cash.

 As you can see, unapplied cash is showing up on the P&L.

This is the detail when I click on the unapplied cash account.  There is a positive and a negative, so it balances to zero.  But my understanding is that it shouldn't show up at all...

This is from the customer's account - you can see that the invoice shows paid and closed, and nothing shows as unapplied.

Also from the customer account - no open balance.

Please let me know if there are additional steps I need to take to get this out of unapplied cash.