Warranty Returns - process and accounting entries

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Customer returns an item under warranty and is issued a replacement part (the faulty part has either already been scrapped or returned to end supplier).    For the replacement part the entry would be DR Warranty Provision and CR Stock.  With an ERP using a different sales order type the SKU number can be used to post the correct entries.  Could this be achieved using a simple accounting system like QBO?  In these cases a replacement is shipped on a zero value invoice.

Where a credit is issued instead of a replacement, would the entry be DR Provision and CR Debtors?  How could these entries be achieved using an ERP or simple system using the existing SKU number?

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By paul.benny
25th Mar 2021 10:59

It's not quite clear from your post what question you're trying to answer.

In my experience, a warranty replacement is often just a regular despatch invoiced at nil value, so the cost sits in CoS. It may or may not be moved to a separate warranty cost line. You refer to a different transaction type for warranty. I'm sure this is possible but I've never come across it.

Obviously the SKU is required to update the stock records. It's not otherwise relevant for accounting unless you're trying to analyse the warranty cost. That applies whether you're issuing a replacement product or a credit note.

Tracking the inventory movements isn't really an ERP-specific functionality; it's more about whether the bookkeeping and stockkeeping are integrated. That may in turn be a question of set-up and modules being used rather than system capability itself.

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