Confusion in recording Online Sales Return

Hello there, Abu-Hafss. You can use Courier Charges for the account.

To create a sales return entry in QuickBooks Desktop. Here’s how:

1. Go to Customers.
2. Select Create Credit Memo/Refund (or directly into the Sales Receipt if you're tracking directly).
3. Fill in the details:
   • Customer Name: ABC Courier (since they are essentially your customer in this case).
   • Item: The item sold (ensuring that your inventory is updated).
     • Sales Return: $300 (This reverts the original sales figure.)

Example for your sales return entry:

• Sales Returns and Allowances: $300
• ABC Courier: $294
• Courier Charges (Expense): $6

Refer to this article for instructions on how to create a credit memo or refund check in QuickBooks Desktop: Give your customer a credit or refund in QuickBooks Desktop for Windows.

If you have further questions related to QuickBooks Desktop, feel free to reach out again. I'm always here to help.

@Abu-Hafss 

"Sales Return      300
ABC Courier                    294
???????                                 6"

You already credited ABC Courier $294 when you collected payment from the customer, so there's no need to do it again.  IMO, the sales return should debit Sales Return $300 and credit cash $300 because you owe your customer $300 for the refused shipment, correct?

@Abu-Hafss 

Who said anything about crediting (reducing) the courier expense $6?  I was just quoting your post.  The correct entry is a debit to sales returns for $300 and a credit to cash for $300 because you owe your customer $300.  

Reducing the Courier Charges by $6 -------- I was actually replying to Jeff.

As far your reply is concerned, seems you have totally misunderstood. The transactions are:

1) ABC Courier            300 Dr
    Sales                                    300 Cr

2) Courier Expense        6 Dr
    ABC Courier                          6 Cr       

At this stage ABC Courier owe me $294  

Undelivered packet is returned. How do we record this Sales Return?

Sales Return                 300 Dr
ABC Courier                               294 Cr

?????????                                     6 Cr

Which account to be credited by $6 ?

@Abu-Hafss 

"As far your reply is concerned, seems you have totally misunderstood."

Cut a guy some slack - you're asking for free help here.  Your original post contained the journal entry showing your customer paid the courier, which never happened.  That made it confusing. 

"Sales Return       300 Dr
ABC Courier                      294 Cr

?????????                                6 Cr"

Credit cash $6 or A/P if you're going to pay the courier at a later date. You still owe the courier $6 because they didn't collect payment from your customer and you offset the payable in JE #2 with a receivable in JE #1.  

Once a packet is booked with the courier company, the courier charges become due, even if the packet is refused by the consignee. And as I mentioned in my first post, I treat the courier company as my customer because they deliver and collect payment on my behalf.

So, when shipping an order the entry is
ABC courier                          300 Dr
Sales                                                   300 Cr

When a packet is delivered or refused, the courier charges become applicable. In this case:
Courier Charges                 6 Dr
ABC courier                                    6 Cr

At this stage, the courier company owes me $294. Now, the packet is returned to me. How to record it? 

@Abu-Hafss 

I know you treat the courier like a customer, but after they return the packet, you still owe them $6 so that's technically a payable.  Because you still owe the courier $6, the entry for the returned packet is:

After this entry, ABC Courier now has a $6 credit balance, indicating you owe them $6, which you do.  You can issue a $6 payment and assign it to ABC Courier if you need to pay them cash, or leave the $6 credit balance on their account and apply it to one of the courier's future charges.  

Once a packet is handed over to the courier, they deduct the courier charges. Therefore, in this case, the courier company practically owes me $294, not 300.

If I follow your suggested return entry, the ABC courier company's ledger would show $6 as credit, meaning I owe them $6, which in reality I do not.

@Abu-Hafss 

Why don’t you owe the courier $6?  The courier hasn’t been paid.

The courier company deducts the Courier Charges as soon as I officially hand-over the packet to them. This means the courier charges are paid in advance.

@Abu-Hafss 

"The courier company deducts the Courier Charges as soon as I officially hand-over the packet to them."

The courier deducts the charges from what?  There's no payment anywhere in your transaction process from which they can deduct their charge.   

"This means the courier charges are paid in advance."

That's not what that means.  Paid in advance?  When?  Where?  How?  You didn't pay them in advance and your journal entries confirm that.  You're recording this transaction as though the courier retains their fee from the payment it collects from the customer, but the customer refused the package and didn't make a payment.  So, how is the courier getting paid?  They aren't.  My journal entry creating a $6 credit to ABC Courier is correct.  It's up to you to pay the courier from that credit.       

Good point! I should have mentioned that I send packets thru that courier company on regular basis. I have their running account as a customer (Accounts Receivable). The courier company will deduct the courier charges from the payments collected previously from other consignees.