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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
Solved! Go to Solution.
"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.
"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.
debit COGS (for purchase value of the damaged inventory)
credit the asset account for inventory purchases
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.
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:
Thanks for any insight you can provide.
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.
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.
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.
if there are damaged goods in the inventory, how can record this transaction??? such as how to remove damaged inventory...
You dispose of damaged goods, enter the loss for theft or "shrinkage" by using the Inventory Adjustment function.
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
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:
If you don't have a miscellaneous income account, you can create one by following the steps below:
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.
I would Dr Sales Discount A/C Cr. Accounts Receivable for Customer's Account ( for the reduction in charge to Customer)
I would Dr Sales Discount A/C
Cr. Accounts Receivable for Customer's Account ( for the reduction in charge to Customer)
because ( damaged goods kept by Customer.
The real question for me was is this a contra-income charge to the gross margin, or is it an expense below the gross margin line. I guess qbteachmt thinks it is a charge to an income account, which lowers gross margin. It would be interesting to hear the logic.
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