Refunds on account or Refunds for Overpayments

For example as Customer has overpaid you by mistake.

You have applied the payment to the invoice, and now there is an amount hanging around when you go to Sales Lodgements. 

You decide to send this money back to your customer. 

The best way to record this in your system is to go to Accounts, Transaction search and find the original payment. 

You will see that it will show the amount left over there. 
Now click Report as Refunded or Bounced, select refund and pick the date

A new transaction will be created to represent the refund.

This will show on the customer statement and also be available to reconcile on your bank. 

It not show on your unallocated lodgements and payments and will not prevent you form closing your VAT periods.