FAWhat is the meaning of refund of debit balance or refund of credit balance

A refund is simply another word for a repayment. Suppose you sell goods on credit for $100. We debit receivables with $100. Suppose the customer accidentally pays us twice (so they pay us $200). We debit cash and credit receivables with $200. So.....we now have a credit balance on receivables of $100. Obviously, we will not keep the extra - we need to repay the $100 to the customer. We make a refund of $100. So....credit cash and debit receivables with $100. Now there is zero balance on receivables and all is correct. All a refund is, is a repayment of cash. Maybe it is because the customer paid too much (as above); maybe it is because the customer returned goods that they had already paid for. The reason is not relevant - if we make a refund then we repay cash. (In the above example, we could say that we are refunding a credit balance, but all we are every actually doing is repaying cash. If we buy goods and pay to much (so the supplier refunds/repays cash to us) then it is exactly the same in reverse.) Hope that helps :-)

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