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Recently, I was asked by a colleague how to devalue items that have been returned from a customer. As I believe that the one or other reader came across similar issues, I summarized some of the pitfalls one should be aware of when recording item returns from a customer.


Some time ago 1000 pcs of an item have been purchased for a cost price of $100/pcs. Later on, 100 pcs were sold to a customer for a sales price of $200/pcs. After the customer noticed that he ordered too many of the items, he returned 20 pcs, which shall be devalued as they have been polluted.

The return of the items from the customer was recorded through the standard return order form. As the originally sales order through which the items have been sold was not known, the ‘find sales order’ button was used. The next screen print illustrates this.


Once the sales order was identified, the return quantity was entered in the return quantity field and confirmed with OK.


Confirming the return quantity this way resulted in the automatic creation of a return order line that was linked to the original sales order. For that reason, the return cost price – which can be identified in the return order line details section below – could not be edited.


Once the returned items were registered and packing slip updated, I tried to outsmart the system by changing the return cost price in the sales order form right before posting the credit note for the customer.


Unfortunately, this trick did not help and had no effect on the cost price that was posted with the item return. The next screen print demonstrates this by showing a posted return cost price of $2000 for the 20 pcs recorded.


warningsignklein Please note the highlighted lot id fields, which illustrate that the original sales order (no. 000800) is linked to the return order (no. 000801).


Because the return order was posted with the original cost price, I tried recording a cost adjustment through the inventory closing and adjustment form illustrated in the next screen print.


Unfortunately, also this did not help because the only transaction available for adjustment was the original purchase order through which the items were originally purchased.


warningsignklein After posting an inventory close, the on-hand adjustment form/option became available. Yet, as I was interested in adjusting only a subset of the total on-hand amount, I gave up on this way of making the value adjustment.


Rather than trying to correct the return order transactions with hindsight, I created a second ‘test’ return order for 10 pcs in order to differentiate it from the first one. This time the return order was recorded without making use of the search functionality but by entering the return order line directly. As the return order line was not linked to the original sales order, I could adjust the return cost price that was finally used when posting the return order credit note. The next screen prints illustrate this.



warningsignklein As the return order was not marked against the original sales order, I was even able to make an adjustment to the return cost price through the inventory closing and adjustment form. For details, please see the next screen print.


warningsignklein An alternative to manually entering the return order lines without referencing (marking) the original sales order is making use of charge codes that can be linked either to the return order directly or to the disposition codes as exemplified in the next figure.


The major disadvantage of those charge codes is that they cannot be setup for item transactions and can thus only be used for creating general ledger accrual transactions that do not have a direct influence on the inventory value in the inventory module.


This post summarized some of the pitfalls one should be aware of when it comes to the devaluation of item returns from customer. The main issue one needs to be aware of is that the search functionality in the return order form marks the original sales order and the return order, which does not allow users modifying the return order cost price.