do you sometimes need to return purchased merchandise to your vendors
well in that case you should watch this video vendor refunds from merchandise
purchases
if you have any questions about this topic you can leave them in the comments section below and
i'll do my best to help you and of course if you feel the video helped you i hope you will
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refunds from merchandise purchases can be very simple
if it was a refund or return from an original purchase where you received a bill
this means if you purchased it on credit then it's very simple to record returning it
however if you are returning merchandise that was paid for by cash and not credit there are
two additional steps that you would have to follow let's discuss refunds from credit purchases first
these are purchases when you recorded a bill when you got the merchandise with the bill
the refund should be recorded by making a credit memo credit memo should have the same items as
the original vendor's bill that came with the purchase the effect of the credit memo is the
exact opposite of the effect of receiving the bill with the merchandise the inventory quantity will
decrease because if you returned items to the vendor you have fewer items available for sale
and the inventory asset will also decrease and of course because you're returning something that
you paid for on credit your accounts payable will also decrease for example let's imagine on july 15
of 2019 we returned five bananas back to sam's farm from bill number 1717 that we received on
june 2nd 2015 i know that was a long time ago but let's just go along with the story
the inventory account will decrease by a hundred dollars because we paid a hundred dollars
originally when we purchased those five bananas the inventory quantity for bananas will of course
decrease by five and the unpaid bill report will show the credit memo until it is applied
to the original bill then we will apply the credit to the bill and of course we will be reviewing a
little bit about what we learned in the accounts payable section so let's leave this slide up and
read from it step by step we click vendor enter bill and then we change the bill to a credit
now once you change the bill window to a credit
you then choose the vendor it was sam's form and the date that we returned it was july 15th of 2019
and now what items are we returning we are returning bananas and we are returning five
bananas making a total of a hundred dollars so this is how you would make the credit
for uh for the return of items that you received with a bill now we click save and close and now
of course we can check the inventory report and see that the quantity of the bananas went
down and we buy a hundred dollars by five bananas and we know that will happen in the inventory uh
account in the trial balance but regarding the accounts payable we have to look at reports uh
vendors and payables unpaid bills and you can see press a for all you can see for sam's farm
there's this matzo ball hanging out there unapplied it's a credit that's supposed to be
applied to the actual bill and it says it should be applied to bill number one seven one seven
uh let's go back yes because it was a return from the merchandise that we received with bill number
one seven one seven and we will apply the credit in the pay bills window so now we have the credit
and bill number one seven one seven has a one thousand one hundred dollar balance
but when we apply them together this credit will disappear from the unpaid bills report
and bill number one seven one seven will go down to a thousand dollars even so again
we use the pay bills window just to apply the credit we click vendor pay bills
and of course the date of the return stays the same 7 15 of 2019 the vendor is sam's farm so
we see only unpaid bills for sam's farm now we have to check this bill
and we are not paying the bill after you check the bill we have to click set you see once we
click on the bill you see there's a hundred dollars of credit available so we click set
credit and of course normally there'd be a list of several credits that we would choose from
but since there's only one quickbooks clicks the check mark to select the only one we can
when we click done you will see that here's the credit used and here are and it assumes
be very careful it assumes that you are paying the rest of the bill
if you are not make the amount you're paying down to zero this way you are only applying the credit
without paying the rest of the bill which is what is happening so we click pay selected bill and
then just click done and you can see in the unpaid bills report the credit disappeared because it has
been applied and the unpaid bill has decreased by a hundred dollars and it's a thousand dollars even
and now we will see what it's like to do a purchase return for something that we paid for
immediately first you would make a credit memo the same way we did a moment ago
as if we were returning something from a credit purchase that we received with a bill
then we record the money we received into the deposit window on the day the vendors
refund money goes into the bank and the last step would be to apply the credit memo to the deposit
so that the vendor reports are clean specifically the unpaid bill report will not show any evidence
of this transaction because both the deposit and the credit memo will be applied to each other
so that the vendor's balance will be unchanged as a result of this transaction
for example let's imagine on july 20 of 2019 we returned five apples to addie's orchard back from
the check we gave her on may 24th in 2015 and she gave us check number 2525 for fifty dollars
the inventory account will decrease and the inventory quantity for apples will decrease
by five and the unpaid bill report will show the credit memo until it is applied
to the deposit so let's go ahead and record the credit from the main menu click vendors
enter bill and then click credit once it changes to credit we make sure we put the date that we
were instructed july 20 of 2019 because that's the day we gave back the five apples we gave them back
to addie and the item that we gave back was apples and the quantity was five now after we click save
and close of course we can open the inventory valuation detail and see that the quantity of
apples has decreased by five but more importantly we can open the unpaid bill report and look at
addie and you see that it did affect her balance we have fifty dollars decreasing addie's balance
and that shouldn't be because she paid us she gave us the money so let's imagine here on july 21
we deposited check number 2525 from addie for the fifty dollars of apples that we returned
well that's very simple banking make deposit and we're not depositing one of the customers payments
so you can close this the date that we deposited her check was january july 21 and you must click
received from addie's orchard you must tell quickbooks whom you received the money from when
you're depositing it now here's the interesting point the from account pay close attention
the from account is accounts payable accounts payable because anytime you affect
the vendor's balance any vendor's balance it affects the accounts payable account
and now the amount that's going into the bank is fifty dollars if you wanna understand more
about this you can watch the accounts payable section right here on this website but anytime
you deposit money from a vendor the account is accounts payable now when we click save and close
you can see that both the credit and the deposit are cancelling each other out
for the vendor's balance so even if this were a vendor who we never received bills
from this would be the way to do it they would have a negative balance at the moment we gave
back the merchandise and then when we deposit their money for the refund that would wipe out you