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. If the customer or supplier will owe money to after the exchange, use a receipt form to record the transaction.
Technically, an exchange can be recorded with a receipt or payment, regardless of whether either party to the transaction owes the other money or who owes money to whom. However, your records will be easier to understand if you use a receipt form when the other party owes you money.
Conceptually, exchanging inventory with a supplier is equivalent to you selling back the item(s) you originally purchased from the supplier and buying new item(s) from the supplier. In fact, you could enter two separate transactions. But there is a simpler way that produces identical results.
In the Receipts tab, click on New Receipt:
On the receipt form, list all inventory items you are returning to the supplier and their quantities. Include any tax code that was applied to the original sale.
Next, list all inventory items the supplier is furnishing in the exchange and their quantities. Because you are effectively paying money for the replacement item(s) rather than receiving it, enter the replacement quantities as negative numbers. Again, include any applicable tax code.
Click Create to record the exchange.
Brilliant Industries previously purchased a ceramic table lamp from Edison Electrical Supply. Brilliant 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 Inventory Items list reveals it owns 32 table lamps and 12 lamp kits:
The receipt form is completed as shown below. Note the negative quantity for the replacement item:
Because the returned item is worth more than the replacement item, Edison owes Brilliant 272.00. When the transaction is complete, inventory quantities have been adjusted. Table lamps have decreased by 1 and lamp kits have increased by 1:
If replacement items are worth more than returned items, you will owe the supplier additional money. This will be shown by a negative total. (A negative receipt is the same as a payment.)
When a customer exchanges inventory, you are effectively selling replacement items and buying back the items you originally sold. The procedure for recording the transaction is basically the same as the one described above: