I’m running into an issue in Epicor when returning material to a supplier, like a bar of steel, after it’s already been received and paid for. When we quantity adjust the material out to correct the inventory (since we can’t just unreceive it at this point), it credits our inventory account. Then, when we process an AP Debit Memo for the return, it credits the inventory account again. This double crediting is throwing off our General Ledger (GL) and stock status—our GL ends up lower than the actual stock due to these extra credits.
What’s the best way to handle this? Would using a reason code for the quantity adjustment that doesn’t hit an account work? Or should we set up a separate GL account just for these return credits? I’m not sure of the cleanest solution and would appreciate any advice!
I believe when you enter the debit memo you can select which account gets credited. Our company uses the quality module, but you should be able to set something similar up:
Create a reason code for quantity adjustments that will hit a Vendor Returns account. This will Credit (reduce) inventory and Debit the Vendor Returns account. The balance in this account would represent material you’ve sent back to the supplier but haven’t gotten credit for yet.
When entering the debit memo from the supplier, apply it to the Vendor Returns account. This will reduce the balance of that account, showing that you got credit for the material you returned.
Since we use the quality module, this Vendor Returns account is the DMR Write-off Expense account used for all quality write-offs, but depending on your finance/management you can make this a separate account from others.
I think you’d have that difference no matter where the adjustments are going.
Say you set it up to where you’re reducing your Inventory GL by the debit memo amount from the vendor. When you reconcile to the Stock Status Report your inventory GL will not match since the debit memo amount didn’t match the average cost of that material. That adjustment will need to go somewhere at the end of the month.
If you use the Vendor Returns account, that difference will live in this account as a balance at the end of the month. If the average cost of the material was cheaper than the debit memo you got from the vendor, this would be a favorable variance. If the average cost of the material was more expensive, it’d be unfavorable. You could either keep the balance in this account at the end of the month or move it to another account to reflect that variance on the material cost.