Ask the Expert: Customer Returns and Allowances - Accounting Software Secrets
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Ask the Expert: Customer Returns and Allowances

Ask the Expert: Customer Returns and Allowances

Ask the Expert: Customer Returns and Allowances

Q – How do you handle the process of returns on the Manufacturing version?  My client is a furniture manufacturer and gets returned merchandise as a result of damages taken place during shipping and of course regular customer returns.

A – First, it is important to note that the following information will be the same for QuickBooks Pro and all Premier and Enterprise Solutions versions. The Premier: Manufacturing Edition does not differ functionally in this area

To determine the correct procedures, it is important to determine if the credit is needed because the product was damaged, or if the product was returned and it is in a condition to be resold.  The later is an important distinction, especially if the inventory feature is being used.

Damaged Goods

A credit memo for damaged goods should be entered using an item created for that purpose.  It is critical that the original item not be used on the credit memo if the inventory features are used.  The item type is typically set up as an “other charge.” For reporting purposes this will provide damage amounts separate from the revenue generated from the original sale. 

Returned Goods

If the product is returned in saleable condition, the credit memo should be created using the same items as the original sales receipt or invoice.  If inventory type items are used, the result will be to increase inventory for the additional product available for sale.

Use of Credit

In either case the credit can be applied to an outstanding invoice, held as a credit to be applied against a future sale, or refunded to the customer.  With version 2005 this process has been simplified with the enhancement of applying the credit memo to an invoice at the time the credit memo is entered, or to apply the credit memo to a subsequent invoice when it is entered.  This change eliminates the need to create a zero balance receive payment to “link” the two transactions together.

More information on this topic

Credit Memos