How do you handle refunds for customers in QuickBooks Online?

Creating a credit memo or refund transaction from the "Sales" menu is the correct approach to handle customer refunds in QuickBooks Online. This method allows you to accurately record the transaction while preserving the integrity of your financial records.

When a customer returns a product or requests a refund, using a credit memo enables you to adjust the accounts receivable balance and maintain an accurate sales history. This process not only reverses the revenue recognized from the original sale but also accounts for the amount being refunded to the customer, ensuring your financial statements reflect the real-time transaction status.

Additionally, by recording a credit memo, you can easily track refunds and manage customer accounts without losing important invoice history. This also provides an effective way to generate reports that accurately reflect sales adjustments over time.

The other methods presented do not align with best practices, as deleting invoices or issuing manual checks may complicate tracking and reporting, leading to potential discrepancies in your records.