Accounting for Refunds within Oracle Payables

Refund Scenario - A supplier will send a request for a deposit of prepayment to the Accounts Payable group. The following is a basic overview of the standard account suggested by Oracle for the entry of a prepayment with a refund from the supplier.

1. Enter a prepayment invoice to the supplier.

Prepayment Account (default) - DR.
Liability Account - CR.

2. Pay the prepayment invoice to the supplier.

Liability Account - DR.
Cash Clearing Account - CR.

3. Reconcile payment in cash management.

Cash Clearing Account - DR.
Cash Account - CR.

The supplier sends a refund check for ‘some amount’ (XX) of the original prepayment.
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4. The Accounts Payable person enters a ‘dummy’ invoice with invoice number ‘Refund XXXXX’ in the amount of the refund.

Expense Account DR. ******Cash Account workaround.
Liability Account CR.

5. Match the invoice to the original prepayment invoice.

Liability Account DR.
Prepayment Account (default) CR.

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At this point, the refund has never been officially recorded in Payables or in Cash Management. The refund will not show any or Oracle’s standard reports. Oracle’s standard process for recording refunds of prepayments includes an additional step to record the refund in Payables and in Cash Management.

6. The Accounts Payable person enters a ‘dummy’ Debit Memo.

Liability Account DR.
Expense Account CR.

7. The debit memo is ‘paid’ with the entry of the refund check.

Cash Clearing DR.
Liability Account CR.

8. The refund is reconciled through Cash Management

Cash DR.
Cash Clearing CR.
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******The Cash account can be used for logging the payment to the correct GL account. However, there are no provisions to have the refund show up on the AP standard reports or to be cleared through Cash Management.