How to Create a Purchase Return
Use this feature to record products returned to a supplier after they have been purchased. Purchase returns help you adjust inventory, reduce supplier balances, and maintain accurate purchasing records.
Before you begin: A purchase return can only be created for products that were previously purchased through a Purchase Invoice.
The system automatically generates a unique Purchase Return Number for every purchase return created.
Step 1: Open the Purchase Return List
From the sidebar menu, click Purchases.
Select Purchase Returns.
The Purchase Return List page will display all existing purchase returns.
Step 2: Create a New Purchase Return
Click the Create button located at the top-right corner of the page.
The Create Purchase Return form will open.
Step 3: Enter Return Information
Complete the required fields:
| Field | Description |
|---|---|
| Return Reason | Enter the reason for returning the products. |
| Supplier | Select the supplier receiving the returned products. |
| Product | Select the product you want to return. |
| Purchase Invoice Number | Select the purchase invoice from which the product was purchased. |
Selecting Products and Purchase Invoice
When you select a product:
The system automatically filters the Purchase Invoice Number list.
Only purchase invoices containing the selected product will be available for selection.
After selecting the purchase invoice:
All products from that purchase invoice will automatically be displayed.
You can then specify the quantity to return for each applicable product.
Step 4: Enter Return Quantities
For each product you wish to return:
| Field | Description |
|---|---|
| Return Quantity | Enter the quantity being returned. |
The system automatically calculates:
Return Quantity
Return Unit Price
Return Amount
Note: The return value is calculated using the unit cost. If transport or shipping costs were recorded when creating the purchase invoice, they will be included in the return amount.
Step 5: Complete Additional Information
Fill in the remaining fields as required:
| Field | Description |
|---|---|
| Note | Enter additional information about the return. |
| Return Date | Select the return date. |
| Status | Select the appropriate return status. |
Step 6: Process the Supplier Refund (If Applicable)
If the purchase invoice has already been paid partially or in full, and the supplier owes your business money for the returned goods, choose how the refund should be handled.
Option 1: Transfer to Supplier Advance
Select Supplier Advance if you want the refund to remain with the supplier as credit for future purchases.
The return value will be added to the supplier's advance balance.
Option 2: Receive Refund to an Account
Select Account if the supplier is refunding the money immediately.
Then complete the following fields:
| Field | Description |
|---|---|
| Account | Select the account receiving the refund. |
| Cheque Number | Enter the cheque number if applicable. |
| Receipt Number | Enter the supplier's refund receipt number if available. |
The selected account balance will increase by the refunded amount.
Note: Refund options are only available when the purchase invoice has already been paid partially or fully and the return value does not exceed the amount already paid.
Step 7: Save the Purchase Return
Review all information entered.
Click Save to create the purchase return.
If you wish to clear the form and start over, click Reset.
The system will automatically generate a Purchase Return Number and save the transaction.
Understanding the Accounting Effect
Inventory
When a purchase return is created, the system will:
Reduce the inventory quantity of the returned products.
Reduce the inventory value based on the returned quantity.
Record the return in the product history.
Purchase Invoice
The related purchase invoice is automatically updated.
A Purchase Return section will appear on the invoice, allowing you to view:
Returned quantities
Returned values
The revised purchase value after returns
This provides a complete purchase history for future reference.
Supplier Account
Creating a purchase return automatically debits (reduces) the supplier ledger account.
If payment has not yet been made, the supplier balance outstanding will be reduced.
If payment has already been made, the refund will either:
Increase the supplier advance balance, or
Increase the selected cash or bank account if a refund is received.
Impact on Financial Reports
Balance Sheet
Purchase returns reduce inventory assets.
If the purchase invoice was unpaid, supplier liabilities are reduced accordingly.
If a refund is received, the selected account balance increases or the supplier advance asset increases.
Supplier Ledger
The supplier account is automatically updated.
Outstanding supplier balances decrease.
Supplier advances increase when selected.
Refund transactions are recorded for future reference.
Inventory Reports
Inventory reports are updated immediately.
Returned quantities are deducted from inventory and reflected in product history and inventory valuation.
Cash Flow Report
If a cash or bank refund is received from the supplier, the selected account balance increases and the transaction is reflected as cash received.
Why Creating Purchase Returns Is Important
Recording purchase returns helps you:
Maintain accurate inventory quantities.
Correct purchasing mistakes.
Track defective or damaged goods returned to suppliers.
Keep supplier balances accurate.
Prevent overstating inventory values.
Maintain accurate financial reports.
Improve supplier accountability.
Keep a complete audit trail of returned purchases.
Best Practice
Always create a purchase return immediately after goods are returned to a supplier. This ensures inventory quantities, supplier balances, and financial reports remain accurate and synchronized with the original purchase invoice.