What is the proper procedure to enter a refund check from a vendor?
In AP, this vendor is currently showing a credit balance.
How do I enter the refund check so that it shows up with the other  
deposits in the check register and makes this vendor total = 0?

You could create an AR Voucher (SALES menu AR-B) to bill the vendor for the refund amount.  (You may need to set up the vendor as a customer before entering the voucher)
 
This would create a receivable and you would need to enter the GL account for the nature of the expense, (ie. raw material account ), This would enable you to apply the check (refund) to the AR Voucher and include it in your deposit.
 
Then you would have to delete the credit voucher in A/P to remove the credit balance for this vendor in Accounts Payable.
 
I'm not sure if there is an easier way.

I agree with David, no way is easy.
 
Can we ask programming for a new feature to convert vendor credits into accounts receivable?
 
We can currently convert sales commissions earned into accounts payable via CS-D without entering an a/p voucher, why not add another conversion from A/P to Sales A/R?
 
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