We need to issue a credit memo, but the customer is scrapping, not returning the inventory. How do we issue the CM without bringing the goods into inventory?

I understand the importance of avoiding negative sales in QuickBooks Online to maintain accurate financial reporting, ldr514.

I'm here to help you properly issue a credit memo in QuickBooks Online.

When creating this transaction, let's add a service or non-inventory item that represents the inventory we can use to prevent it from affecting your sales.

Here's how:

1. Go to Get paid & pay or Sales, then select Products & services.
2. Click New. Then, choose Non-inventory or Service.
   
3. Enter a Name for the product or service.
4. In the Description field, enter a detail to help determine that this is only a dummy account.
5. Select the account you want to use to track the sale from the Income account drop-down menu. 
6. Once done, select Save and Close.
   

Once done, create a credit memo using the item you've created. For visual guidance, I've added a screenshot below.

Should you need additional assistance creating sales transactions in QuickBooks Online. Please keep us posted in this thread. We'll keep an eye on your response to get the assistance needed.