How to proces an invoice of a returned item

Last year end december i bought some diamond wheels i uses for gem cutting.
I returned them after a while because they where not what i hoped they would be and i got a return invoice for that.
Since i got my VAT returned the first invoice is in manager and say it is not payed yet.
I can’t pay the invoice anymore because i send the wheels back and i don’t know what to do with the invoice.

Is there a way to use Inter-account transfers, so i can book the money for the invoice in there and balance it with the return invoice ?

Use a debit note. Don’t cancel the original purchase invoice. It was a real transaction that created an account payable. Allocate the debit note to Supplier credits for that supplier. The two will offset.

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Thank you for your reply Tut,

Can you tell me how to do this ?

Kind regards


Enable Debit Notes under Customize. Select the expense account to which you originally allocated the purchase invoice so the debit note will undo it. Manager takes care of debiting the Supplier credits asset account.

I enabled the debit notes, but i need to pay the invoice first ?
i can only select my bank credit card or cash there

No. Entering a purchase order records your obligation to pay the supplier. That is why accounts payable are liabilities and the purchase invoice actual credits a liability account. Entering the debit note effectively debits the same liability account.

Payment is another transaction entirely. If there is a balance remaining that you owe the supplier (such as if you purchase 3 wheels and returned 1), just pay the amount you still owe. The sum of your payment and the debit note should equal the supplier’s original invoice to you. Depending on the supplier’s accounting system, you may have received a statement that shows the reduced amount owed. If you returned everything on the original purchase invoice and received a debit note for the full amount, you should now owe that supplier nothing.

Thank you for your answer Tut

I did that but i can only select inter account transfers and not the Supplier credits

I apologize if I’ve confused you. I have used some terms generically or conceptually rather than in a step-by-step approach. In doing so, I may have assumed you have more experience with Manager than you do (based on when you joined the forum). So let me outline things in greater detail.

When you originally created the purchase invoice for the wheels, you should have allocated the purchase to an expense account such as Supplies, or wherever you collect such things. And you should have indicated an already-established Supplier. That would create or add to the balance in Accounts payable.

When the Supplier took your returned wheels, they issued you something you referred to as a return invoice. In reality, whatever they called it, it was not an invoice, but rather a credit note (from their perspective). Because you are on the opposite side of that transaction, you should enter it as a debit note, indicating the Supplier (so Manager knows what subaccount to put it in) and allocating to the same expense account where you allocated the purchase (Supplies in my example).

Because you indicated the debit note was associated with the Supplier, Manager automatically converts the debit note to a supplier credit for that Supplier. And because there was an outstanding account payable due to the purchase invoice, it automatically lowers the amount due on the purchase invoice. You can follow this by looking at the Summary page and drilling down until you get to the underlying transactions. This is what I was referring to when I mentioned the supplier credit offsetting the account payable. What probably confused you is that you don’t actually select Supplier credits account to do it.

At this point, both Accounts payable and Supplies have been reduced by the amount of the debit note. When you come to pay any remaining balance of the purchase invoice, Manager will automatically fill the payment with only the amount still owed.

Now imagine you have already paid the purchase invoice before you return the wheels. The Supplier agrees to take them back and issues the credit note. When you enter this as a debit note, it goes straight to Supplier credits, because there is no unpaid purchase invoice.

You also have the option when entering a debit note of specifying which purchase invoice it applies to. If you don’t specify anything, Manager will allocate automatically. I confess I don’t know all the rules for how that happens.

I hope this helps rather than confuses further.

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Thank you for your answer Tut, it’s all very clear now :slight_smile:

Hello Tut

I have one more qustion, i just entered the debit note without problems.
Now i noticed that my supplies is a negative number −
229,75. because i bought the wheels last year and the credit not is from this year.

Should this be this way ?

I am sorry i am just a beginner :slight_smile:

Yes, that’s how it should be. If you like, you can allocate debit note to income account, e.g. “Refunds from suppliers” rather than using original expense account so you see the amount as income rather than negative expense.

Yes i did looks better this way , i assigned it to various income.
And maybe i will make a Refunds from suppliers later.
That would be a bit clearer

thank you

Whether you create a special account depends on personal preference. But if you don’t expect this to happen again, or only once or twice a year, there isn’t much point. It is generally impossible to predict all the strange things you encounter in a year’s worth of accounting transactions for a business. That is why most charts of accounts include accounts for “Other Income” or “Miscellaneous Income” and similar for expenses. You should also consider your tax reporting forms. Will there be a category in which to report your special case? Or will it end up being combined with other occasional things in a general “other” category anyway?

One other possibility is to allocate to the same account where the original purchase went as a contra entry. For example, you record purchase expenses for 20 pencils. You return one. If both transactions go the same account, you have effectively recorded the purchase of 19 pencils, exactly what you kept. No special account is needed, and you don’t even use the “other” account.

I don’t think it will happen much i had 2 this year but i expect it to be a coincidence.

Thank’s for the help i learn a lot from this!