How do i record a transaction where products came in as replacements for damaged ones?

Thanks for reaching out to us, accounts-solaviv

I can share some tips on how you can record a replacement for the damaged item in QuickBooks Online (QBO).

You can set up an expense account to track the amount of damaged inventory items. Then, link them to a service item. 

To start with, let's set up a bad debts expense account: 
 

1. Go to Accounting from the left menu and choose Chart of Accounts.
2. Click New.
3. Hit  Expenses as the Account Type.
4. Choose Bad debts as the Detail Type.
5. Enter “Bad debts” in the Name field.
6. Click Save and Close.
    

Next up, you need to create a service to link this expense account. Here's how:

1. Highlight the Sales tab.
2. Choose Products and Services.
3. Press New.
4. Tap Service.
5. Enter a name.
6. Change the Income account to the expense account you created above.
7. Click Save and close.
    

Once done, you'll have to create a sales receipt with the service you've just created. Make sure to add enter the correct amount of the damaged inventory item. This way, QuickBooks will recognize the amount as a loss for your business.

I'm also adding this article to learn how to see your best sellers, what’s on hand, and the cost of goods: Use reports to see your sales and inventory status.

Keep me posted if you have any other concerns or additional questions about inventories. Have a good one.