How to pass entry for RMA (return material authorization)


I would like to know how to pass entry for RMA (RETURN MATERIAL AUTHORIZATION)?

We sell a computer component to our client and if its faulty, they send it back to us for replacement or repair.
We then send the faulty component to our vendor for replacement or repair.
And in the meantime, if we have the same component in stock, we will send that component to our client
and when the repaired / replaced component comes back from our vendor, it will be as our stock at hand.

Now, how do i pass the entry for the same:

  1. Inventory came back from Client
  2. Inventory send to our Vendor
  3. Existing Inventory send to Client as replacement
  4. Inventory came back from our Vendor.

Also, some time we detect the faulty Inventory before sales and we send for RMA to our Vendor.
How this will be entered in Manager?

To process the transactions as part of the normal stock movements.

  1. You would issue the Client with a Credit Note. (Credit Notes is a separate tab)
  2. You would issue the Supplier with a Debit Note. (Debit Notes is a separate tab)
  3. You would process a Sales Invoice. (This would cancel out the issued Credit Note)
  4. You would process a Purchase Invoice (This would cancel out the issued Debit Note)

For the detected faulty inventory - you would issue a Debit Notes.


So here’s till where i could understand:

Sale Invoice:

Say, out of 5 Books, 1 book came back to us for replacement.

So, I created a Credit Note for the Customer:

Now my Inventory (Book) Shows as follows:

Then i issue Debit Note to Supplier:

So now the Inventory is as below:

So I understood the Step 1 and Step 2

But could you please explain in brief, Step 3 and Step 4.

Want I wanted to do in step 3 is, give the stock in hand (Book 1 quantity) to the Client.
For this, i need to create a New Sales Invoice?

If yes, then the Inventory will show zero balance. And

Step 4 would be creating new Purchase Invoice of the replaced inventory (Book)

But the value of Sales Invoice and Purchase Invoice will be 0.00/- right?
Only the quantity is what needs to reflect as per the physical stock.

If this is the case, i pretty much understood the process.

Thank you.

No - Your Credit Note and Debit Note need to contain values as well, not just quantities.

When your Client returns the book, you need to Credit them 1000, as they now only have 4 books.
If you don’t have any more in stock, so you can’t replace the item then the client shouldn’t pay 5000.
If you do send a replacement then the Sales Invoice for 1000 cancels out the Credit Note

Same with the Supplier, the Debit Note should be for the purchase value of the book.
If the Supplier can’t repair or replace the item then you will owe the Supplier less money.
If the Supplier does replace then the Purchase Invoice cancels out the Debit Note

In both the cases, the payment is done to the vendor and the money is received from the customer before detecting the faulty inventory.
And we always get a replacement from a vendor. Same way, we always provide replacement to our customers.

So in either case, New Sales Inv and Purchase Inv needs to be created?
Then, how should i go about the payment transaction for both when the money is received and paid in full?


If both the Supplier and the Customer have fully paid, then the outstanding balances are zero - ok

Step 1
The customer returns the product and you issue a credit note - Customer now has a negative balance
(because the customer has now overpaid - purchased 5 but only has 4)

Step 2
Send the Customer a replacement product with a Sales Invoice - Customer now has a zero balance
(because the customer has now purchased 5 and received 5)

So no payment is required - the Sales Invoice is cancelled out by the Credit Note
If you have the replacement item in stock and is dispatched the same day then you could possibly ignore the paperwork, but if there is going to be a time delay between receiving and returning then the paperwork helps to keep track of events.

The same 2 step process applies when returning products to the Supplier, except its a Debit Note
The Debit Note informs the Supplier who is returning the product, how many and the reason

So the Credit Note Amount = 0 ?

Issue the Customer New Sales Invoice with amount = 0 ?

Great, will keep this in mind. However, there is part number / serial number to an inventory. So i may need to follow the above steps. (Credit Note)


NO - They must have values

Original Invoice - Customer purchases 5 and pays for 5 - 5000
Faulty Product Returned - Credit Note issued for 1 and for 1000
Customer now only has 4, but has paid for 5 - 5000 and has Credit Note for 1 - (1000) ='s 4000

So if “no” replacement was sent then Customer could either be
a) refunded via Spend Money, or
b) have credit balance to use against the next purchase

If a replacement was sent then the Customer would have purchased/paid for the original 5 - 5000
Have received a Credit Note for 1 - (1000) and a Sales Invoice for 1 - 1000
The Credit Note is then used to pay off the 2nd Sales Invoice

Oh yes. I am sorry i didn’t work out the test files with entering the amounts, that’s why wondered if the new sales inv (for replacement of the faulty Inventory) will show paid in full or no.

But yes, it does.

The transaction shows as follows:

And the transaction for the new sales inv (for replacement of the faulty Inventory) shows as follows:

Hope I have passed the entries correctly.

Same way the Debit Note and New Purchase INV ( Replaced inventory) reflect correctly.

So now the Inventory Movement Shows as follows:

Which is what I wanted.

Thank you so much for your time and patience.

Regards :slight_smile:

Looks good but can I suggest that when processing the Credit Note, you leave the Credit field blank, as the Invoice has already been fully paid in cash.

You would only use the Credit field if the invoice selected still had an unpaid balance. You will still get the same result but will eliminate those extra entries titled (1) Overpayment and (2) Automatic. The Customer account will look cleaner. Try it out on your test files.

Yes, Got it.

Got rid of the Overpayment entry by leaving the credit field blank.

The transaction for the new sales inv (for replacement of the faulty Inventory) shows as follows:

Same as before.

Hope this is right.


Hello @Brucanna

Just a heads up on why i wasn’t sure about entering a value to Credit Note and Sales INV is:

If you observe in the above snapshot, by creating the replacement Sales INV with amount to 1,000/- my total sales also got affected.

As the Original Sales INV is 5,000 which included the 1,000 amount of Inventory.

So by creating the Credit Note and Sales INV with 1,000 amount, My total sales has gone up by 1,000 which is wrong.

That’s why i wanted to have the sales and credit note amount to be at zero as the original sales inv was paid in full and according to our policy we always give the replacement to our customer.

Further to update you, I am passing entries in Manager for past transactions (Data entry) where the Replacement of the faulty inventory was done already to the customer.

I am receiving the replacement from my vendor now is the reason i have to show the stock in.

Keeping the Credit Note and Sales INV amount to zero wont affect the books right???
As the payment was received in full and the replacement was given to the customer as well.

All i had to show in Manager is the Inventory Movement.


Your screen shot is from the Sales Invoices tab so it will only list Sales Invoices and the Credit Notes tab will only list Credit Notes To see the impact on your Sales you need to look at the Inventory - Sales account.

In the above discussions we only used invoices # 5 & 6 where everything worked out ok, so don’t know about this invoice #7. It appears from the Description that it’s a new sale that’s unpaid - so unrelated.

Your credit notes should have reduced sales, as you are reversing part of the Sales Invoice

Credit Note - Account & Inventory Item

Inventory Sales account