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casualheroescard
November 26, 2023
Question

I have a retail shop that accepts inventory for store credit. How do I account for this?Known: Inc/Dec Inventory Asset & Inc/Dec Trade In Credit (Other CL)

  • November 26, 2023
  • 1 reply
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I have seen online where it told me to do credit memos, bills, invoices and I'm just not sure the most work way to do it. Since I'm doing all of this manually

1 reply

Rainflurry
Rainflurry
November 27, 2023

@casualheroescard 

 

A credit memo is the obvious choice IMO.  When you create a credit memo, QB will record a credit that you can see on the customer's account and that can be applied to future invoices.  However, you cannot automatically apply credits to sales receipts (not sure why QBO can't do that).   Are you creating inventory items (Products) for each trade?  If so, set up the item first, then use that on the credit memo.  That will add the item to inventory and record the customer credit.   

C
casualheroescardAuthor
November 27, 2023

Thank you so much for your response.

 

Pretty much all the time we set up store credit for inventory. There are a few instances where we just give a person store credit, like if they won an event or something and they want store credit instead of a prize.

 

When I set up the item, it gives me a choice to either do non-inventory or services. Which one would I do?

Rainflurry
Rainflurry
November 27, 2023

@casualheroescard 

 

"When I set up the item, it gives me a choice to either do non-inventory or services. Which one would I do?"

 

If you're tracking your inventory, you want to create an inventory product, not a non-inventory product.  The difference is significant.  When you set up an inventory item, the item goes into inventory (asset) and is only expensed when you sell it.  If you use a non-inventory item, you expense it at the time you take it in on trade.  It sounds like creating a non-inventory product is the way to go, right?  Well, the IRS has rules about that, and if inventory is a significant income-producing factor, then you should be using accrual accounting and capitalize (record as an asset) the cost of inventory when you bring it in on trade.  Hence why you should use inventory products.  The inventory vs. non-inventory issue can get cloudy based on some new tax rules that went into effect in 2018 but, IMO, you should use inventory items.  Contact your own CPA if you need further guidance.          

 

"There are a few instances where we just give a person store credit, like if they won an event or something and they want store credit instead of a prize."

 

It's important to understand that QB is an accounting system, not a point-of-sale system.  Therefore, it doesn't work well when issuing store credit when a customer wins a prize.  The reason is that QB is a double-entry accounting system that affects two accounts with every entry.  In the case of store credit when someone wins a prize, there is no offsetting entry for the store credit because you have not received cash/inventory and you have not incurred any expense.  Ideally, you would issue your customer a physical card for the store credit so you can wait to record that until they redeem their prize, if they ever do.  You can create a service product called "Prize Discount" (or something similar) and discount the invoice/sales receipt using that.    

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