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Exchange inventory

For purposes of this Guide, you exchange inventory when either:

and no credit is involved in the transaction. That means:

In other words, an exchange occurs when all movement of funds and inventory is accomplished in a single transaction. If the items exchanged are not of equal value, movement of funds can be via bank or cash transaction.

Customer returns goods

Conceptually, a customer exchanging inventory is equivalent to you buying back the item(s) the customer originally purchased and selling the new item(s) to the customer. In fact, you could enter two separate transactions. But there is a simpler way that produces identical results.

In either the Bank Transactions or Cash Transactions tab, click on New Bank Transaction or New Cash Transaction and select Spend money:

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OR

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On the payment form, list all inventory items the customer is returning and their quantities. Include any tax code that was applied to the original sale.

Next, list all inventory items the customer is buying in the exchange and their quantities. Because you are effectively receiving money for the replacement item(s) rather than paying, enter the replacement quantities as negative numbers. Again, include any applicable tax code.

Click Create to record the exchange.

Example
Brilliant Industries previously sold a ceramic table lamp to Bob’s Hardware on a cash basis. Bob’s Hardware realizes it purchased the wrong product and wants to exchange the lamp for a lamp kit. Because these are wholesale transactions, no tax is assessed on any portion of the transaction.

Prior to the exchange, Brilliant’s Balance Sheet shows 1,000 in Cash on hand and Inventory on hand worth 4,432.53:

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Brilliant’s Inventory Items list reveals it owns 18 table lamps and 5 lamp kits:

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The payment form is completed as shown below. Note the negative quantity for the replacement item:

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Because the returned item is worth more than the replacement item, Brilliant owes Bob’s Hardware 108. When the transaction is complete, the Balance Sheet has been adjusted, showing less Cash on hand and increased Inventory on hand:

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Inventory quantities have also been adjusted. Table lamps have increased by 1 and lamp kits have decreased by 1:

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Note
If replacement items are worth more than returned items, the customer will owe additional money. This will be shown by a negative total. (A negative payment is the same as a receipt.)

You return goods to a supplier

When you exchange inventory with a supplier, you are effectively selling back the items you originally purchased and buying replacements. The procedure for recording the transaction is basically the reverse of the one described above:

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