Understanding the Book Entries for a Refund

Good news: you don't need to know these entries — Springly handles them for you. 🎉

This article is for anyone who wants to understand the accounting mechanics behind the scenes.

It goes deeper into the concepts covered in the article Recording a Refund or Credit Note Entry.

Let's walk through an example:

You recorded a membership for $50, the member has already paid, and is now requesting a refund. You agree to refund them and need to record the corresponding entry in your books.

A refund entry is simply the reverse of the original membership entry.

Your sales entry breaks down into two parts:

1/ Recording the membership revenue, which affects the third-party account (your member) and the revenue account (income for the nonprofit):

2/ Recording the membership payment, which clears the third-party account (the member has paid and no longer owes anything) and updates the bank account:

The refund entry also consists of two parts when the refund payment is actually made — mirroring the original sale and payment entries for the membership.

1/ Recording the cancellation

2/ Recording the refund payment

And that's all there is to it!