Exchange orders are linked to the original order in the system, and refunds are processed against the original order. For users who already use automation, the process is also automated. For users who process refunds manually, this process is also manual. This flow is also reflected in your Shopify back office.
For example, when a customer requests an exchange for order 991237, a new exchange order, EXC991237, is automatically created. If the customer then requests a return and refund, once the request is approved (either manually or automatically), the refund is applied to the original order, 991237, and issued automatically. The exchange order, EXC991237, remains visible in the system with a paid value of "0."
Note: This feature is an opt-in retailer level setting. You can enable or disable it from the Settings > Exchanges.