A refund is a repayment of funds from the original payee to the original payer. Refunds most commonly occur in standard sales transactions, when a customer returns goods to the seller and receives a refund at that time. The refund may be in the form of cash or a credit that can be used for the purchase of other goods from the seller.
A refund may also be paid when the seller originally invoiced an excessive amount to the buyer. In this case, the amount of the overage is paid back, and the customer retains possession of the goods that were originally acquired.
Another situation involving a refund is when a taxing authority pay funds back to a taxed entity when it finds that the taxed entity overpaid its taxes.