Accolent ERP allows for a Credit Memo to distinguish between the items being refunded which can be put back into Inventory, which are Defective and which have been approved for a refund but are Not Returned. Items that are Defective may have some salvage value, but are completely written off and carried in Defective Inventory at a zero value. If there is a recovery of some salvage value in the future, this can be recorded as a gain on sale when realized through a sale. Items that are to be credited but authorized for Not Returned are typically damaged (often verified by obtaining a picture of the damaged item) and are not worth incurring the shipping charges to recover. See also this wiki: Dealing With Defective Items.
Defective Items
- Defective status is only for those items that while damaged may still be serviceable and possibly may be able to be sold at a discounted price; if items are damaged and unusable, they should just be written off through a manual inventory adjustment.
- Items that are defective but able to be returned to the vendor should not be put into Defective, instead they should be put on a negative PO and returned to the Vendor for credit.
- When moved to Defective, a write-off is taken for the full cost of the items moved to Defective and the items are carried in Defective at zero cost.
- If at some later point, there is a possibility of selling the Defective items at a discounted price, they must first be moved into Inventory and this will create a negative expense to reinstate the costs written-off.
- Once moved back into Inventory, the damaged items can be sold at a discounted price.
Create a Sale Transaction
- In Warehouse 1, Product I700V-254 has QOH of 1019, Q-Avail of 923 and Q-Def (Qty Defective) of 0.
- Create order 31992 for 10 EA x I700V-254.
- Move to Fulfillment then to Invoice.
- Check inventory of I700V-254: QOH decreased by 10 to 1009, Q-Avail decreased to 913.
- The GL posting of the transaction is.
Create a Credit Memo
- Now create a Credit Memo and import from invoice 31992, with Qty returned for credit of 4.
- Creates CM31992 for 4 items.
- Move to Fulfillment.
- Record total of 4 credited (i.e., refunded).
- Of the 4 items credited, only 2 are able to be returned to Inventory, 1 can be entered as defective and, by prior arrangement, 1 has been verified as damaged and so was approved to not be returned.
- All these quantities need to be entered as negative as does Qty on Order.
- Move CM31992 to invoice.
- Verify inventory effects: QOH increased by 2 from 1009 to 1011, Q-Avail increased from 913 to 915, and Q-Def went from 0 to 1.
- The GL posting of the credit memo is as follows:
- The Sales, AR and COGS reversals, repectively, reflect the full sales price, invoice totals and cost of the 4 items returned.
- The Inventory posting reflects the return of 2 items to inventory and the write-off of the 1 x Defective and 1 x Not Returned items.