What is the correct way to refund excess amount received from Customer?


If a customer pays excess amount compared to Invoiced amount, how to record return of the excess?

A regular customer places order for some items worth Rs 4750 (Sales Invoice raised for Rs 4750)
Customer Paid Rs 5000 (Payment Entry created for Rs 5000, Rs 4750 Settled against Invoice, Rs 250 Unallocated)
Here Rs 250 is excess and company wants to return it.

Question: How to record Reverse Payment/Refund of Rs 250 so that no amount remains unallocated in original Payment of Rs 5000?

@nabinhait , could you please guide me in this case?

Hi Ajay,

Make a Payment Entry and pay the Customer. Or make a Journal Entry and use the Accounts Receivable account and use the Customer as Party and submit the Entry. You should be able to knock off the unallocated amount against this transaction.

Or am I missing something? Reason I ask is that this seems to be a fairly simple and straightforward transaction.

Hope this helps.



Hi JayRam,

I tried Payment Entry with Payment Type = Pay, but system does not allow creation of the payment entry. Below is the validation error. Is there a reason why system won’t allow reversal of surplus balance using a simple payment entry?

Note: I tried the JV route and could knock off the surplus balance. But, the entry is not a Payment Entry which does not go well with the Accounting Team.


Please check this post


I already tried these steps as JayRam has described in earlier reply.
I was able to knock off the unallocated amount by creating JV and then settled it in Payment Reconciliation.


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