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How to record Damaged Goods/Inventory in quickbooks?

 we sold out Goods to Customer when the Customer received products, the customer reported products were damaged, so we offered new goods to replace damaged ones for free. The customer keeps damaged goods. So please help how to record  Journal entries about this?  thanks very much.


Please give the best solution, Thanks 

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Best answer 12-10-2018

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Established Community Backer ***

"debit COGS (for purchase value of the damaged inventory)...

"debit COGS (for purchase value of the damaged inventory)
credit the asset account for inventory purchases"

You already have that entry from the original Sales Transaction. And you want to avoid using JE for this; that won't affect inventory or sales reporting. Further, you never post a JE to the asset account for inventory, if you are using QB inventory type item names. When you do that, you break the relationship between the Accounting and the Inventory management tools; you Changed an account outside of the requirement for the associated "Item Name reference" for qty and/or cost.

You create a Credit Memo for the customer and don't use the original items, since you are not getting an RMA condition. You use an Other Charge type item linked to an income account for tracking Refunds and Write Offs.

This Credited Value is either applied to that open invoice or applied to the New invoice for the replacement parts. The New Invoice is where you list the Replacement parts. If this had been a Paid Sale with no replacement shipment, this Credit Memo has the icon at the top to Refund the customer. And it correctly affects Sales and sales reporting.


21 Comments
Established Community Backer ***

"debit COGS (for purchase value of the damaged inventory)...

"debit COGS (for purchase value of the damaged inventory)
credit the asset account for inventory purchases"

You already have that entry from the original Sales Transaction. And you want to avoid using JE for this; that won't affect inventory or sales reporting. Further, you never post a JE to the asset account for inventory, if you are using QB inventory type item names. When you do that, you break the relationship between the Accounting and the Inventory management tools; you Changed an account outside of the requirement for the associated "Item Name reference" for qty and/or cost.

You create a Credit Memo for the customer and don't use the original items, since you are not getting an RMA condition. You use an Other Charge type item linked to an income account for tracking Refunds and Write Offs.

This Credited Value is either applied to that open invoice or applied to the New invoice for the replacement parts. The New Invoice is where you list the Replacement parts. If this had been a Paid Sale with no replacement shipment, this Credit Memo has the icon at the top to Refund the customer. And it correctly affects Sales and sales reporting.


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Thanks very much Dear qbteachmt, i am confused about your...

Thanks very much Dear qbteachmt, i am confused about your solution, could you please make more clear and easier. thanks very much.
Established Community Backer ***

You sold inventory already, so QB will have Debited COG a...

You sold inventory already, so QB will have Debited COG and Credited Asset already for those inventory items you listed on the sale. The Damaged good arriving at the customer's location is not a JE. You are going to replace the items but at No Charge. No Charge = discount or write off = Credit Memo, so that you can apply that to the Replacement which is a New Sale for you.
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great thanks very much

great thanks very much
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thanks dear qbteachmt

thanks dear qbteachmt
Active Member

Does this apply to non-inventory items as well? We are th...

Does this apply to non-inventory items as well? We are the go between for client and vendor  and do not keep stock but it comes out of our pocket when items arrive damaged.
Active Member

Does this apply to non-inventory items as well? We are th...

Does this apply to non-inventory items as well? We are the go between for client and vendor so we have no inventory but it comes out of our pocket if something is damaged.
Established Community Backer ***

@mcochran "Does this apply to non-inventory items as wel...

@mcochran

"Does this apply to non-inventory items as well?"

It is a Process that applies to Anything that meets this need: reversing a sale.

"We are the go between for client and vendor so we have no inventory but it comes out of our pocket if something is damaged."

Here is what matters: You use on a credit memo whatever you need to see on your reporting, that flows data to the account(s) and has a taxable status that applies to your need. It is That basic.

Now you flesh it out: did you want to list the same Original Item as the Original Sale, to see in your reporting, qty Sold and qty Reversed? And, if that is inventory and it isn't going back to stock, you cannot list Inventory on the CM.

You get to list whatever you need on Sales transactions. The Credit Memo is the mirror image of Sales, and it still is Yours to control, for tracking, reporting, and proper accounting.

Example: I charge your charity for 10 hours Service item and then I credit memo half as Donation in Kind. I happened to use an Other Charge Item to show my reduction of the gross hours charged, or I can list my same Service item on the Credit Memo.

Hope that helps.
Not applicable

What if the shipping company damages the inventory item?...

What if the shipping company damages the inventory item?  We will file a claim with the shipper.  Do we void the invoice to the customer and create a new invoice for the shipping company?  
Established Community Backer ***

You are not going to Void a sale that happened. For the c...

You are not going to Void a sale that happened. For the customer, you Write Off that invoice with a Credit Memo, to close their AR. You are not Charging the Shipping company for inventory; you are getting an Settlement from a Claim; that is not Product Sales.
Not applicable

When I generate the credit memo, the item is place back i...


When I generate the credit memo, the item is place back in inventory.  How do I remove the item from                   inventory as it is not saleable?  Thank you.
Established Community Backer ***

You do not use the Original Inventory Item as the credit...

You do not use the Original Inventory Item as the credit memo, if you are not getting the item back to inventory. It has been covered in this topic:
Here is what matters: You use on a credit memo whatever you need to see on your reporting, that flows data to the account(s) and has a taxable status that applies to your need. It is That basic.
Community Contributor *

debit COGS (for purchase value of the damaged inventory)...


debit COGS (for purchase value of the damaged inventory)
credit the asset account for inventory purchases 


Established Community Backer ***

Re: debit COGS (for purchase value of the damaged inventory)...

Never Debit COGS and Credit inventory, if you are tracking inventory by actual Inventory Type items and Name; you just broke the relationship between the account balance and the item Values. That is a mistake. You use the Adjust inventory function, not a JE, because you must list the Actual Products you want to affect, by Quantity.

Frequent Explorer *

Re: You sold inventory already, so QB will have Debited COG a...

Hi, I have a similar situation that I need help with in QBO, if you might be able to help answer. Here is my scenario:

 

  • The wrong items were shipped to a customer after they paid the invoice.
  • Because it was our mistake, We then ship the correct items at no charge if the new items actually cost more than the original. When they cost less we refund them the difference.
  • Sometimes they don't/can't return the incorrect items to us because they are custom-fabricated items specifically for their use.
  • How do we record the loss of the replacement products we shipped out, since we aren't refunding the customer at all for the original sale?
  • PS: we don't have inventory tracking turned on in our QBO.

Thanks for any insight you can provide.

 

QuickBooks Team

Re: You sold inventory already, so QB will have Debited COG a...

Hi smiramontes19, 

 

Since you don’t have the inventory tracking turned on, you'll want to create a journal entry to record the loss. Click the Plus ( + ) icon and choose Journal Entry, under the Tools column. 

 

However, it's best to consult an accountant to help you identify the affected accounts. 

 

The Community is always open to help you if you have other questions. 

Established Community Backer ***

Re: You sold inventory already, so QB will have Debited COG a...

@Catherine_B

 

Please learn from this Input. Nothing here is done using JE; because it is Sales and has to be managed as Sales using Customer Activities.

 

@smiramontes19

 

Let's break this down:

"The wrong items were shipped to a customer after they paid the invoice."

List the same item on a Credit Memo (customer return/refund transaction) to show the Reversal of that sale.

 

"Because it was our mistake, We then ship the correct items at no charge if the new items actually cost more than the original."

This is the New Invoice. You Apply that Credit Memo to this invoice.

 

"When they cost less we refund them the difference."

The credit memo either leaves an amount Owed to the customer (which you refund from the credit memo) or the Invoice is not fully paid by applying the credit memo, and the customer owes you that balance.

 

"Sometimes they don't/can't return the incorrect items to us because they are custom-fabricated items specifically for their use."

It's still up to you, if you want to show the Wrong item is "refunded/returned" = Credited Back, for purposes of Sales management. Or, you an use a Noninventory product item for "RMA" when you don't get the Actual Item returned, which you are not Stocking and tracking as such, anyway. Think of what You want to see on your reporting:

RMA only

Or, RMA when there was not a Return of the actual sold item(s)

 

That's your choice.

 

"How do we record the loss of the replacement products we shipped out, since we aren't refunding the customer at all for the original sale?"

 

Think it through differently; yes, you are Crediting Back a Value, against an Item of your choice for the reversal of the original sale. That Value is then being Refunded, applied to the Replacement sale, or Some of Each function.

Experienced Member

Re: How to record Damaged Goods/Inventory in quickbooks?

if there are damaged goods in the inventory, how can record this transaction??? such as how to remove damaged inventory...

Established Community Backer ***

Re: How to record Damaged Goods/Inventory in quickbooks?

You dispose of damaged goods, enter the loss for theft or "shrinkage" by using the Inventory Adjustment function.

Experienced Member

Damaged inventory on shipment to a trade fair

I have a question

 

My inventory asset was damaged on the way to a trade fair i was attending. It was never sold to a customer. I received payment for the item + shipment costs (international as it was an import) + shipment costs to the trade fair + customs duties..

 

Now i need to record the insurance payment but dont know how..

 

The item was taken into inventory on 09/09/2018 but the insurance payment was 02/04/2019

 

Can you please help me how to record this on QB

QuickBooks Team

Re: Damaged inventory on shipment to a trade fair

Hello there, Ozusa.

 

I'd be pleased to guide you in recording insurance payment in QuickBooks Desktop.

 

First, you'll need to make an inventory adjustment to adjust the quantities to the actual count.

 

I'm adding this article for more information about how to make inventory adjustments in QuickBooks Desktop: Adjust inventory quantity or value.

 

Once done, you can Make Deposits and record the deposit of the insurance check and use your Miscellaneous Income account in the From Account column on the deposit screen.

 

Here's how:

  1. Go to Banking.
  2. Click Make Deposit.
  3. Choose a customer and enter necessary information.
  4. Use your Miscellaneous Income account in the From Account column on the deposit screen.
  5. Click Save & Close.

MISC.PNG

 

If you don't have a miscellaneous income account, you can create one by following the steps below:

  1. Go to List.
  2. Click Chart of Accounts.
  3. Click Account drop down arrow and choose New.
  4. Choose Income and click Continue.
  5. Fill in the information needed.
  6. Click Save & Close.

You'll want to read this article to learn more about creating an account in QuickBooks Desktop.

 

You've got me here if there's anything else you need to know more handling insurance payment in QuickBooks. I'll be around to help you some more.