After looking at this situation further, the correct way to record a cash refund on a cash sale is with a receipt in which the quantity is negative and the unit price is the original sale price. (Taxes can be left out of this discussion, because they are handled correvctly by both methods.) This will reverse the posting of the sale amount to Inventory - sales, reverse the cost of goods sold posted to Inventory - cost, and restore the quantity and cost of goods returned to Inventory on hand. As a result, average cost of the inventory item will also be returned to what it would have been had the sale not occurred.
The instructions in the Guide on how to pay a refund–https://www.manager.io/guides/5495 —are incorrect because of the inability to select the Inventory - sales account (or a contra sales account) to post a payment to, as the Guide says you should. Instead, selection of the inventory item forces selection of Inventory on hand. The result if recording a refund as a payment is that the cost of returned goods is recorded as the original sales price, which distorts the average cost. Further, the original income posting cannot be offset with a contra entry. (Some accounting procedures actually leave the original sale in place, but offset it in a contra income account for returns. Manager won’t allow that. Likewise, the cost of goods sold cannot be offset by the return.)
I will initiate action to update the Guide.