Purchase Return

A Purchase Return is the act of returning goods that were originally bought from a supplier. This mostly occurs when the buyer encounters an issue or no longer requires it. The reasons behind the purchase of goods being returned might be because there are defects in the materials purchased, supply of goods which are not of the desired quality, there are inconsistencies between goods supplied and the specifications agreed upon, or at times, because the buyer has to liquidate stocks with alterations in demand.

The Return of Goods to the supplier can be documented and managed in a formal method through the Purchase Return module of ERPNext. The characteristic enables proper accounting entries, proper inventory adjustments and proper communication with suppliers. With this feature, a business is not able to over state its stocks or financial liabilities and maintains correct records.

1. Prerequisites

Before creating and processing a Purchase Return in the system, it is recommended to have certain records already created. These documents aid in maintaining appropriate traceability and ensuring that the return procedure is connected to the initial purchase transaction.

First, you ought to have the following:

• Item
• Purchase Invoice

Or

• Purchase Receipt

2. How to create a Purchase Return

You must first locate the original purchase receipt for the returned items in order to start a purchase return in ERPNext. In order to make accurate stock and accounting adjustments, the system must directly link the return to the original purchase transaction.

Step-by-step process:

1. The original purchase receipt should be opened.

   • Go to the Purchase Receipt List and find the record against whom the supplier supplied the items you now want to return.
   • Open this record to look at the details of the initial transaction to make sure it is indeed the right one for the return.

2. Create the Return Document

   • While looking at the original Purchase Receipt, click on Create → Return.
   • This will automatically create a new Purchase Receipt form with the "Is Return" checkbox ticked.
   • The system will duplicate the details (Items, Rates, and Taxes) from the original transaction, but all the quantities and amounts will be indicated as negative values, denoting that this is a return and not a fresh purchase.

3. Submit the Purchase Return

   • When you have checked and verified all details, submit the Purchase Return document.
   • At submission, the system will automatically debit the item quantity in the involved warehouse.
   • The stock balance will be revised based on the original purchase rate of the returned products in keeping profit and valuing other stocks well.

4. Effect on the Accounting Ledger

   • In the Accounting Ledger, the Stock In Hand account will be debited, which shows the decrease in physical stock.
   • Stock Received but Not Billed account will be credited, balancing the accounting entries with the stock movement.

5. When Perpetual Inventory is enabled

   • When Perpetual Inventory is enabled in the system, ERPNext will also make accounting postings against the warehouse account.
   • This maintains the warehouse account balance in relation to the stock balance according to the Stock Ledger, keeping the financials and inventory accurate.

3. Impact on Stock Return via Purchase Receipt

When you are doing a Purchase Return of a prior Purchase Receipt, in that case ERPNext also updates the stock records and in the pertinent purchase documents, as well. This allows consistency and accuracy of all the transactions related to it.

Key impacts are:

1. Updation of returned quantity

   • The Returned Quantity field of the Purchase Receipt is entered with the amount of products sent back to the supplier.
   • Assuming that a Purchase Order is linked to the Purchase Receipt the system adjusts the amount returned on that particular Purchase Order. To keep both of the documents balanced, it does not overstate the stock or pending deliveries.

2. Status Change of the Original Purchase Receipt

   • If all 100% of the items in the Purchase Receipt have been returned, the status of the original Purchase Receipt automatically becomes "Return Issued".
     • This status update is a clear signal that no goods from that sale are left in stock and the purchase has been reversed in full.

4. Related Topics

• 1. Sales Return
• 2. Perpetual Inventory

5. More To Follow

• Zikpro ERPnext Demo

• www.zikpro.com