If you use the cash method of accounting, you use the first method you mention in your question. You do expense the item for 2018, and you report the refund as income in 2019. With the cash method of accounting (which is the most common method for a small business), you count an expense when you pay it, and money received when you receive it. If both the purchase and the return happen in the same year, it cancels out. But when one year ends and another begins, this is the technically correct way to report this.
However, if you use the accrual method, it depends. The refund is linked to the purchase, and the accrual method does not depend on when the money changed hands but when the exchange took place. A refund nullifies a transaction, so if the item was returned quickly, (using the accrual method), you would be justified in not counting it in 2018 income. Under audit, your accounting method would hold up to justify your treatment.
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