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eiuasa93
November 5, 2024
Question

Vendor invoices & credits - help me think this through

  • November 5, 2024
  • 1 reply
  • 0 views

Let me know if I'm thinking this all through correctly. Bear with me this has a lot of pieces. We use QB Desktop 2024. We import sales info from our POS as a journal entry (crediting inventory, debiting COGS, crediting sales tax payable, etc.) and that's all good. I'm trying to think through the vendor payables side of things. Let me know if I'm missing anything, I'm trying to clean things up for this business.

1. We purchase goods from a vendor and receive an invoice. I enter it as a Bill and choose the appropriate vendor and inventory account and class (we have several retail locations). JE behind the scenes is a DR to inventory and a CR to A/P.
2. BUT if there is shipping charged on the invoice that amount should be broken out separately when I enter the bill and charged to the shipping expense account, yes? JE behind the scenes for that piece is a DR to shipping expense and a CR to A/P.
3. We pay the bill by check. JE behind the scenes is a DR to A/P and a CR to Cash.
4. We return damaged inventory. Vendor issues a credit memo which we will use to offset future invoices. I enter it as a Vendor Credit and choose the appropriate vendor and inventory account and class. JE behind the scenes is a DR to A/P and a CR to Inventory. When we pay the bills we apply the outstanding credits and the net is recorded as a DR to A/P and a CR to Cash.
5. We receive a credit memo from a vendor not related to specific inventory (promo credits, frequent buyer credits, that kind of thing). The credit will be used to offset future invoices. I enter it as a Vendor Credit and choose the appropriate vendor and the COGS account. Because it doesn't affect inventory, only our overall COGS expense. JE behind the scenes is DR to A/P and a CR to COGS.

1 reply

Rainflurry
Rainflurry
November 5, 2024

@eiuasa93 

 

"1. We purchase goods from a vendor and receive an invoice. I enter it as a Bill and choose the appropriate vendor and inventory account and class (we have several retail locations). JE behind the scenes is a DR to inventory and a CR to A/P."

Correct.
"2. BUT if there is shipping charged on the invoice that amount should be broken out separately when I enter the bill and charged to the shipping expense account, yes? JE behind the scenes for that piece is a DR to shipping expense and a CR to A/P."

Yes.
"3. We pay the bill by check. JE behind the scenes is a DR to A/P and a CR to Cash."

Correct.
"4. We return damaged inventory. Vendor issues a credit memo which we will use to offset future invoices. I enter it as a Vendor Credit and choose the appropriate vendor and inventory account and class. JE behind the scenes is a DR to A/P and a CR to Inventory. When we pay the bills we apply the outstanding credits and the net is recorded as a DR to A/P and a CR to Cash."

Correct.
"5. We receive a credit memo from a vendor not related to specific inventory (promo credits, frequent buyer credits, that kind of thing). The credit will be used to offset future invoices. I enter it as a Vendor Credit and choose the appropriate vendor and the COGS account. Because it doesn't affect inventory, only our overall COGS expense. JE behind the scenes is DR to A/P and a CR to COGS."

Correct with the caveat that you certainly could assign a different expense account to the Vendor Credit as you see fit.  If you had co-op advertising dollars, for example, maybe you want to record that to reduce your advertising expense on the Vendor Credit instead of COGS.  

 

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