do your customers sometimes return merchandise to you of course everyone has customers who
sometimes return merchandise that's why you should watch this video refunding merchandise sales in
QuickBooks 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 click like and don't forget to subscribe to get updates on new videos that come out all the
time refunding merchandise sales is very simple if it's a credit sale meaning it's very simple to
record if the original sale was recorded on an invoice the additional step is if it's a
cash snail refund and we will cover both of those issues right here in this video refunding credit
sales invoice means the original sale was recorded by making an invoice the refund should be recorded
by making a credit memo credit memo should have the same items as on the original invoice from
the original sale the effect of the credit memo is the opposite of the invoice the sales income
for that item will decrease by the sales price of the items that are returned the cost of goods sold
will decrease by the weighted average purchase cost of the items that were just returned and
the inventory quantity will actually increase because if a customer gives back merchandise you
now have more merchandise available for sale in inven Hori now here's our example let's imagine
on July 1 2019 Alan returned three bananas from the sale made on June 3rd 2015 where we made an
invoice for that sale the sales income account will decrease by 300 because that was the price
of the bananas returned the cost of goods sold account will decrease by $60 because that was the
purchase cost of the bananas that Alan returned and the inventory quantity for bananas will
increase by 3 because if a customer returns three items there are three more available for sale so
watch how we do this in QuickBooks desktop from the main menu click customers create credit memo
now we have to choose first we should put in the date it was July 1 of 2019 and the customer was
Alan I believe the customer was Alan yes and the item that was returned was bananas and the
quantity of the item returned was 3 so you can see $300 will decrease the balance of
sales income when I click Save and close you get this question now we will check the numbers in
a moment but please note refunds from invoice sales should be retained as a credit this way
they can be applied to the customers invoices and balances and if you're not sure about the details
please see the accounts receivable course for more details on how to manage customers credits
and balances but in the meantime let's make sure these numbers happen in QuickBooks so we click
retain as an available credit and click OK now when we open the trial balance and open the Sales
Account double click go to the very bottom the very last transaction in the sales income account
was this credit memo decreasing the sales income by the sales price of the three bananas that were
returned we can also double click the cost of goods sold account and look at the very bottom
and see the very last transaction in the cost of goods sold account is a credit memo decreasing
the cost of goods sold by the amount that we paid for the bananas that were returned and finally if
we open the inventory valuation detail and look at the very last transaction for bananas we see
there's an increase in quantity by 3 because a customer just gave us 3 more bananas now in
the case of a cash sale refund you make a credit memo the same way as if it were a credit invoice
a sale again the effect reverses the sale in the accounts and in the inventory quantity exactly the
way we saw a moment ago you make the same credit memo as in a credit sale from an invoice however
the additional step for a cash refund is to have QuickBooks issue a refund this will record a write
a check transaction to decrease the cash and Bank for the amount of the sale returned so take a look
at this example let's imagine on July 2nd of 2019 candy returned for apples from the sale made to
her on June 1 2015 we make a credit memo but when we finished the credit memo we will instead click
issue a refund and you will notice something interesting so let's go ahead and make the
customer enter credit create credit memo refund and this is what's the date here the date is July
2nd of 2019 and the customer is candy and the item that she's returning is apples and how many apples
for apples so the quantity that she's returning is 4 now we already know sales goes down by 200 now
look what happens when we click Save and close we get this choice but this time because we're
refunding a cash sale and giving back money we will click give a refund and then click ok now
this box comes up and what this enables us to do is print a check that we can give to candy
for $200 and it gives us the ability to decrease the bank account by the amount that were actually
refunding of course you would choose cash and bank instead of undeposited funds if that's
where the money from the refund would come from and then we click OK now I could show you the
accounts and again repeat the reverse effect that you saw a moment ago but the interesting thing is
that the cost of goods sold actually decreased by what the current average cost is not by what the
average cost was back on June 1 2015 so you have to keep that in mind when you do your accounting
when I open the trial balance and double click cost of goods sold and scroll to the bottom you
can see this last credit memo decreases the cost of goods sold but not by 4 dollars for for apples
it decreased it by 43 74 because even though it was refunding something from far in the past
when you create a credit memo for a refund for a customer it will use the current average cost and
that's something to think about and consider you should also consider that you can double click and
open the check and see exactly what QuickBooks did if you're interested we can go here to cash
in bank double click and scroll to the very last transaction it says credit refund and
notice if we double click oh you see this opens up here and this is the same thing as writing a
check however you must do it this way because if you try to write a check yourself instead
of doing it the way I just showed you cannot directly write this check yourself because you
cannot put a negative quantity of merchandise in the bottom of a check so it's very easy to
do but there's a lot to consider when you give a cash refund for a cash sale of merchandise you