How should you categorize a purchase refund?

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#1

Scenario:
Let’s say you buy a food item at the grocery store during a weekly grocery run and it costs $40. You get home, find that the food item is expired. You go back to the store, get a $40 refund put back onto your debit card. Then you pay $40 for a new fresh food item.

Question:
How should you categorize the $40 refund? I would think you would want the refund added back into your monthly grocery budget so that the grocery budget doesn’t just have two $40 expenses and no refunds.

The solution I tried:
I’ve tried to make a category called “Refunds - Groceries” and make its “Type” an Income. But the refund doesn’t seem to affect the monthly grocery budget.

I’d love to hear what thoughts anyone may have! Thank you in advance!

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#2

Hi @Jeff.Martens
Welcome to the Community!

Almost there! Here’s how we do it at our house:

The first purchase is categorized as Groceries, a deduction of cash against your budget. The second transaction, the refund, is applied to the same category, Groceries, an addition of cash and restoration to the budget for that time period. The third transaction, buying the fresh item, is applied to the same category, Groceries, a deduction of cash against your budget.

No need for any other category. It all happens in the one Category-Groceries: the first two transactions cancel each other out (one positive, one negative, equal amounts), with third one telling the real story.

Use the Note column of the Transaction sheet to add comments that explain each transaction for full documentation, and you’re one your way.

Does that help?

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#3

@Brad.warren

Oh, I can’t believe I didn’t think of trying that. That worked like a charm.

Thank you very much for your help!

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#4

I’ll second @Brad.warren’s approach. Back in my naive Mint.com days, I used an income category for refunds, but in the process of taking on Tiller as my budgeting solution, it just made so much more sense to consider the refund as a restoration of budget.

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#5

I’ll third that. Especially in your case. It is a total refund. Most users have this situation, a complete refund. But, as I have learned here many times before, this is YOU. Do what you want. Do what makes sense to you. This is your Tiller sheet. You live with it every day, not us. Anyways, you have three smart people saying the same thing, so you are in good hands. Cheers,

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#6

Refunds that I can directly attribute to a product previously purchased go back to the same category of that original purchase.

The ones I have struggled with are the cash back or other promotions that are more generic. I generally wait to use those until I have a “special” purchase in mind and that will help offset the cash outlay. But categorizing both the debit and credit in the same category takes away the purchase in my run rate. For example, if I use toward paying for a vacation, and list my vacation expense under Travel, then applying the cash back award to Travel effectively hides the vacation cost. So I have been using “Other Income” for these. It is not ideal but I do not want single use categories and I want year over year insight on what larger purchases have cost me.

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#7

I record my credit card cash back rewards as income too. To do anything else will skew those other categories like you mention.

Whenever I get a courtesy adjustment from a vendor, I record that as income too in order to not skew the expense category. For example, I have received $550 of these adjustments from Comcast over the past 12 months. What can I say, they mess up a lot. I do not want that amount netting against my normal monthly Comcast bill.

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#8

To add to this a little further, if I purchase something March 20, and then return it on April 5, I edit the date of my return transaction to be March 31 (the last day of the month it was purchased) to ensure my monthly budgets don’t get thrown. You could also edit it to be the same day you bought it in the first place (March 20) if that made more sense to you.

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