Hi one of our export customers hasn't paid their invoice and has unexpectedly returned the goods. The chance of recovering the payment from the customer in China is almost nil. This may sound ridiculous but am I able to treat the non-payment as a bad debt? Normally, there would be no hesitation, however because we've received the inventory back, I'm wondering if this changes the treatment of the original revenue? Thanks.
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It can't be treated as a bad debt because it's not a bad debt. It's a return and needs to be treated as such.
Hmm
Whether you treat it as a bad debt or a return there will be a debit to your P&L (an expense for bad debts or a reduction in turnover).You'll need to make a credit to COS and a debit to stock to take the stock back on your books before you sell it again.