Why Does a Supplier Refund Increase the Balance When Allocating It?

Symptoms

You have received a refund from a supplier and posted it to the Purchase Ledger as an On Account transaction.

When you attempt to allocate the refund against an outstanding invoice, the values add together instead of reducing the balance.

Explanation

This behaviour is expected.

Posting a supplier refund directly onto the Purchase Ledger increases the overall liability on the supplier's account. As a result, when you try to allocate it against an invoice, the balances increase rather than offset each other.

How Should a Supplier Refund Be Cleared?

To correctly clear the refund from the supplier's account, you should have a supplier credit note on the Purchase Ledger.

The credit note can then be allocated against the relevant purchase invoice, reducing the outstanding balance as expected.

Summary

• Posting a supplier refund as an On Account Purchase Ledger transaction increases the supplier balance.
• This is expected accounting behaviour.
• To clear the refund correctly, a supplier credit note should exist on the supplier's account and be allocated against the invoice.

If you are unsure how the supplier refund should be recorded, or no supplier credit note has been received, please speak to your accounts department or accountant before making any further postings.