I've been struggling with a seemingly simple problem in Microsoft Small Business Accounting 2006...how to document a refund from a vendor where the money went from the vendor straight back into a checking account.  I can't find documentation of it anywhere...everything stops just after explaining how to create the 'vendor credit memo'. 

After a brutal stretch of trial-and-error (that will probably make my accountant stroke out), I think I have finally figured it out. 

1. Create the 'vendor credit memo' following the normal procedure
2. Go to 'Banking'
3. Choose 'Make Deposit'
4. Change the deposit date to match the original refund date
5. Select the financial account (i.e. checking) where the money was refunded
6. Enter something useful in the 'Memo' field (i.e. 'Refund from return of XYZ product')
7. Click 'New Deposit Line' in the title bar
8. Change the date to match the refund date
9. Under 'Deposit money from', choose, 'Vendor', then select your vendor from the list
10. Enter the amount of the refund (deposit) in the 'amount' field
11. Click 'Record'
12. Click 'Save and Close'

I hope this helps someone else out.