do you sometimes return merchandise to vendors that you purchased on account
well then you need to know how to record returns to vendors for on account purchases
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when we return items to vendors that have been billed the effect on the accounts is the opposite
of entering the original bill from the purchase the document that you make when returning items
that were billed on account is called a vendor credit then you must apply the vendor credit to
the original vendor's bill so what happens in the accounts when we return items that we purchased
for credit well obviously inventory asset goes down for the amount that we paid for the items
because if we're physically giving back items to the vendor we have less inventory and because the
vendor's balance is reflected in accounts payable we owe the vendor less money if we return some of
the items so both inventory asset and accounts payable will decrease for the purchase cost
of the items that were returned for example let's imagine on january 9th
we returned three apples to addie's orchard from the january fourth bill number eight
four seven two so let's just go ahead and make a vendor credit for that it's very simple we click
new in the top left go to the column of vendors and go down to where it says vendor credit
now filling out the vendor credit is the same as filling out the bill we put the date of the
return we choose the specific vendor so that's january 9th for the date and addie's orchard
for the vendor now remember we're not dealing with expense categories so you can click this triangle
and collapse this we're dealing with items so click the triangle to open the items section
then under where it says products and service click here and choose apples and we are returning
three and since we paid ten dollars each for the apples where returning
quickbooks knows the amount of this vendor credit is thirty dollars we click save and close
and now when we click reports and we go to the trial balance
you can see that inventory asset if you double click inventory asset and go to the bottom
the very last transaction in inventory asset was january ninth it was a vendor credit
in the amount of thirty dollars lowering the inventory asset click reports go back to trial
balance and you can see accounts payable has also decreased from 500 to 470 and you could open that
up and see here was the original bill for the 500 and here's the vendor credit lowering it to 470.
now let's click reports inventory valuation detail and you can see for apples at the bottom
section of apples we have three fewer apples as a result of this vendor credit lowering the money
amount and quantity that we have of apples now you also have to check the unpaid bills report
click reports unpaid bills now i don't want to get too sidetracked into the accounts payable section
but basically this is the bill and this is the vendor credit now the unpaid bills report should
not really show both the bill and the vendor credit it should put them together and show you
one remaining amount of 470 for that bill what you have to make is what's called a zero dollar
bill payment just to be able to apply this credit to this bill now this is something you learn more
deeply in the accounts payable course but i just want to show you because it is part of inventory
you really should apply the vendor credit for merchandise to the bill for the merchandise
so we will make a bill payment on january 9th the amount will be zero we will simply apply these two
together to make the unpaid bills report look the way it needs to look click new go to vendors and
click pay bills now make sure it says january 9th the day that you actually made the credit and on
the day okay so we already have annie's orchard up here because that's the only unpaid bill we have
and it's a little unusual how you apply the credit you have to click here
and then you have to apply the credit uh here notice it already knows
that there's thirty dollars of credit available for addie's orchard so as soon as you do that
as soon as you click this bill it will apply the credit but be careful when it applies the credit
it assumes you're paying the rest of the bill and we are not yet paying the rest of the bill
so please change the payment amount to zero and make it so that all it does is apply the credit
to the bill save and close and now the unpaid bill report looks the way it should
500 was the bill but the open balance now unpaid is only 470.
you