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Level 1

What is the point of Line Items on Credit Memos?

I'm trying to figure out how to issue a Credit Memo to a Customer but am stuck on Line Items. My use case is issue a Credit Memo a Customer to be applied to an outstanding or future Invoice, but QuickBooks seems to want me to specify an Item (Product or Service) the Credit Memo is for. I'm not sure what Item to specify, as I don't want the Credit Memo to apply for just a specific Item. The purpose of issuing my Credit Memo is for promotional reasons or overpay and has nothing to do with a specific Item.

 

Furthermore, I've been unable to determine what specifically the point of the Line Items on a Credit Memo is. When testing in my QuickBooks Sandbox account, it seems a Credit Memo I issue to a Customer is always applied to the next available Invoice, regardless of if the Invoice contains a Line Item referencing an Item the Credit Memo also references in a Line Item.

 

I understand I could use a DiscountLineItem on the Invoice instead, but I'd like to do this with a Credit Memo as the reporting seems more robust and I can track the specific date the Credit Memo is issued (as opposed to a DiscountLineItem inheriting the Invoice's date).

 

Can anyone help me figure out the best way to use QuickBooks for my use case of issuing a Credit Memo for a Customer that has nothing to do with a specific Item?

Solved
Best answer April 16, 2020

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QuickBooks Team

What is the point of Line Items on Credit Memos?

Hey there, @bricehartmann

 

Thank you for reaching out to us here in the Community. 

 

The main reason to have an item listed on the credit memo is to account for any inventory items properly. Meaning that when the invoice was paid, whatever items were sold, inventory would decrease. Then when issuing credit, the same items can be selected to re-add to the quantity for those inventory items.

 

Since you want to offer a credit for promotional reasons, you'll want to set up a non-inventory item named "Promotion" or whatever you'd like. Then, you'll select your Promotion item when creating a credit memo. 

 

For more information, you can check out the details outlined in these articles:

 

Please don't hesitate to let me know if you have further questions or concerns. I'll be here to help you every step of the way. You can always reach back out to the Community or me anytime you need us. Take care! 

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Highlighted
QuickBooks Team

What is the point of Line Items on Credit Memos?

Hey there, @bricehartmann

 

Thank you for reaching out to us here in the Community. 

 

The main reason to have an item listed on the credit memo is to account for any inventory items properly. Meaning that when the invoice was paid, whatever items were sold, inventory would decrease. Then when issuing credit, the same items can be selected to re-add to the quantity for those inventory items.

 

Since you want to offer a credit for promotional reasons, you'll want to set up a non-inventory item named "Promotion" or whatever you'd like. Then, you'll select your Promotion item when creating a credit memo. 

 

For more information, you can check out the details outlined in these articles:

 

Please don't hesitate to let me know if you have further questions or concerns. I'll be here to help you every step of the way. You can always reach back out to the Community or me anytime you need us. Take care! 

View solution in original post

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Level 1

What is the point of Line Items on Credit Memos?

"Then when issuing credit, the same items can be selected to re-add to the quantity for those inventory items."

 

What do you do in the case that you don't want those inventory items to go back to inventory? For example, a damaged item? 

 

You're recording a credit memo as a return so they get a credit for next time, without restocking the items. 

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Level 1

What is the point of Line Items on Credit Memos?

Hi, 

 

Were you able to address this issue? I also need to create a partial refund without affecting the units I sold since they're not going back into my inventory.

 

Thank you

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QuickBooks Team

What is the point of Line Items on Credit Memos?

I'm here to help you create a partial refund, cabralocacoffee.

 

Let's create a non-inventory item and link it to the partial refund income account to avoid changes in your inventory count. I'll guide you how.

 

  1. Go to the Sales menu and then select Products and Services.
  2. Click New.
  3. Select Non-inventory.
  4. Enter a name for the item.
  5. Make the income account similar to the inventory item that needs a refund.
  6. Click on Save and close.

 

Once done, we can now create a refund receipt. Here's how:

  1. Go to the + New button and then select Refund receipt.
  2. Select the name of the customer.
  3. Choose the payment method and the account.
  4. Pick the non-inventory item you've created on the Product/Services column.
  5. Enter the other necessary details. 
  6. Once you're done, click on Save and close.

 

To know more about providing a refund to your customer, check out this article: Record a customer refund in QuickBooks Online.

 

You may also want to consider using reports to see your sales and inventory status. Doing so will help you track your items in QuickBooks.

 

I’m just a few clicks if you have other questions. Your success with QuickBooks is our top priority. Have a good one.

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Level 2

What is the point of Line Items on Credit Memos?

The problem with the above solution is that it does not accurately report the Average Selling Price (ASP).  

When you discount your product and your customer pays you less,  you may want to view this as a lower ASP, since you have been unable to get the payment you invoiced for.  In many cases, these discounts are not valuable to the vendor.  GAAP requires you to either decrease the sales amount or increase the COGS.

 

Accounting for the discount by either a contra-income account (create an item called Discount Given of type Discount) or by refunding a non-inventory item as the solution suggests, will satisfy GAAP, but it doesn't track the ASP correctly.

 

I'd suggest crediting 1 item of the thing you sold at the price of the promotion.  So if you sold them 1,000 widgets for $1,000, and they forced you to run a useless promotion for $200, then credit them for 1 widget at $200.  Then, at the end of the year you can adjust the inventory for the one widget.

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