If a customer has already paid for the merchandise sold and the product type is inventory, then it is best to process the transaction as a Payable, and pay the refund as a cash disbursement.
Return Fully Paid Inventory Sale
- Create a Payable to the customer. The amount to refund on the Payable Line should be positive. Set the “Expense GL Account” on the Payable line to the Revenue GL account that was credited on the original Billing. The value for the product on the Payable Line should be left blank or null. This will reverse the revenue recorded on the original Billing.
Tip - In the Payee Reference field of the Payable, indicate the Billing and reason for the refund to the customer. This explanation will be printed on the check or if a credit card transaction can be useful in reconciling the account.
- Create a Cash Disbursement by following the standard instructions for creating a single or batch cash disbursement(s).
- Create a new Inbound Inventory Movement for the product, warehouse, and location you are returning the inventory goods to.
- From the Inventory Quantity Available list view, select the Inventory Quantity Available record for the item(s) you are returning to stock. If there is not an Inventory Quantity Available record for the product, warehouse, and location combination, you need to create a new record.
- After selecting the record you wish to return the goods to, create a new Inbound Inventory Movement from the Inventory Quantity Available related list.
- Enter the quantity you are returning to stock and the unit cost for the product. The unit cost should be obtained from the original Sales Order’s Sales Order Inventory Movement record.
- Select “Accounting” as the Type from the drop-down menu.
- Set the Debit GL account to your Inventory GL account and set the Credit GL account to the same account used to record Cost of Goods Sold on the original allocation of the Sales Order.
- Change the movement date to the same date as the credit memo you issued (step 1 above).
- Save this record.
This will do the following:
- Increase the quantity available for that product;
- Add it back to your inventory GL balance at the correct weighted-average cost;
- Reverse the revenue recorded on the original Billing; and
- Reverse the Cost of Goods Sold recorded on the original Sales Order Inventory Movement.