partial credit for inventory items

Dealing with partial credits for damaged inventory items can be tricky. Rest assured, I'm here to guide you on recording a partial credit for a customer regarding a damaged inventory item that won't be returned to stock.

Before anything else, I recommend consulting your accountant on how to create an account to record the damaged goods, including the applicable sales tax.

Once done, let's create an item to track the damaged item:

1. Hover to the Lists, then click Item List.
2. Click the Item drop-down, then choose New.
3. Select Inventory Part in the Type section.
4. Enter a Name (Damaged Goods) in the Item Name/Number field.
5. In the Income Account, select the account you've created with your accountant.
6. Modify the rest of the field, then click OK.
   

After creating an item, we can now generate a credit memo to track refunds:

1. Navigate to the Customers section, then select Create Credit Memos/Refunds.
2. From the Customer: Job drop-down, select the customer who purchased the product customer.
3. Enter the items we've created (Damaged Goods).
4. You have a few options when handling a credit memo in QuickBooks.
   • First, you can retain the credit as an available credit. In this case, QuickBooks will record a negative amount in your Accounts Receivable (A/R) register for the credit memo. This credit can then be used to pay for future transactions, and you'll be able to see these available credits in the customer payment window.
   • Alternatively, you can issue a refund, either in cash or via check. If the customer paid with a credit card, you’ll need to follow the process for refunding a credit card payment.
   • Another option is to apply the credit directly to an invoice. QuickBooks will open the Apply Credit to Invoices window, allowing you to select which invoice you’d like to apply the credit toward.
   • For detailed steps and further information, please refer to this article: Give your customer credit or refund in QuickBooks Desktop for Windows.
5. Specify the amount of credit being issued in the Amount field. For instance, if you are issuing a $100 credit on a $500 sale, enter $100 here.
6. Continue editing the necessary fields, then select Save & Close.
   

This process allows you to effectively manage partial credits for damaged goods while keeping your inventory and accounting records in check. 

Moreover, it's a good practice to periodically review transactions through reports such as the Sales by Customer Summary to monitor any credits issued.

If you have any further questions or need additional assistance, please don't hesitate to reach out, Denise. We're here to help ensure your accounting processes run smoothly and efficiently.

@denisemoe 

IMO, the advice given by @RogelioL isn't good.  You don't want to set up an inventory item for this as suggested.  If you did, you would be putting this item into inventory when you issued the Credit Memo.  You can use a service or non-inventory item and call it whatever makes the most sense to you - Customer Credit, Damaged Product Credit, whatever.  When setting up the item, select the appropriate income/expense account under the 'Account' drop down.  If you want to see this account separately on reports, use a dedicated income/expense account or use the same income account that was used on the original sales receipt/invoice for the sale of the damaged item.  Mark the item as taxable/non-taxable as needed.  Then, issue a Credit Memo to the customer using this newly-created item.