Charging a Vendor Labour Costs for Inspection and Quarantine
by Jody
(Ontario, Canada)
Charging Back Labor for Defective Merchandise
Hi All,
My company recently received defective product from our Vendor. We are charging the Vendor labour costs for inspection and quarantine.
What are my options for accounting for these charges in QuickBooks?
Hi Jody,
There was an Intuit Community posting discusses returning defective products titled "Return Authorization for customers and vendors". Intuit seems to have removed this post and similar posts this past month.
The contributor suggested creating a customized purchase order template called Vendor Product Return. Customize the PO template by changing the title, relabeling the PO Number field to Return Authorization Number, and relabeling the Terms field to Return for:
Once you have created the PO template, the contributor said to open it and fill it out. Include the form when returning the product and send another copy of it to the vendor.
S/he did mention that your inventory is not affected by doing this as you still own the property.
If/when the vendor issues a credit, record the credit memo as you normally would using the "items" tab. This will clear your inventory. Close the PO without receiving any items.
If the vendor sends you a replacement, receive it as you normally would by creating a bill. Also, create a credit memo for the returned items at this time. Offset/apply your credit memo against your bill to keep your inventory clean and balanced.
If the vendor sends a refund, create a
Your last step will be to go to "Pay Bills" and apply the cheque deposit to the credit memo.
I'm not sure why Intuit removed the post(s). I'd be interested to know if this worked for your situation.
To charge your labor, I'd just create a Sales Invoice (or a Vendor Credit Note) and charge it to a sub-account of your COGS account(s). I'd call it something like "Labor-Defective Merchandise".
Maybe site visitors have a different idea/suggestion they would like to share with you on how to record the labor on defective merchandise.
Editor's note: This question and answer was originally posted on July 16, 2013. It was revised on August 9, 2013.
P.S. I would like to remind you there is a difference between information and advice. The general information provided in this post or on my site should not be construed as advice. You should not act or rely on this information without engaging professional advice specific to your situation prior to using this site content for any reason whatsoever.
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