Accounting for Returns to Vendor

This chapter provides an overview of accounting for returns to vendor (RTVs) and discusses how to:

• Cost methods used for RTV depletion.

• Cost destroyed material.

• Return consigned inventory.

• Return subcontracted material.

• Review an RTV example.

Understanding Accounting for RTVs

PeopleSoft Cost Management accommodates the various reasons for returning goods to a vendor:

You can specify the receipt being returned or the receipt can be unspecified. You can return items for credit that are the same or different than the cost of the original receipt. You can record other miscellaneous charges, such as, restocking fees and freight. With PeopleSoft, you can return items to a vendor at any time:

• If you refuse an item during the physical receipt of the vendor's shipment into your warehouse. Then you record the return on the receipt pages in PeopleSoft Purchasing. In this situation, the system never considers receipt of the item to be accepted and no RTV form is needed.

• You can also return the item after you record the receipt, after it is put away into PeopleSoft Inventory, and even after the system matches the receipt to an invoice, pays it, and posts it. In all of these situations, the receipt should be allowed to flow through to PeopleSoft Payables and an RTV should be created to offset the voucher. PeopleSoft Payables will build an adjustment voucher when you return an item for credit or if you enter adjustment fees, such as restocking fees, when you enter the RTV.

• You can return an item after closing its PO and reopen the closed PO when necessary. You can even return an item in situations where a PO or receipt identifier is no longer or never was known. You enter on the RTV page all the data that normally appears by default from the PO or receipt. You can record additional RTV fees that are charged by either you or the vendor; the Voucher Build process picks up the fees and creates an adjustment voucher.

Costing Methods Used for RTV Depletion

PeopleSoft Cost Management calculates the cost of returned items using the transaction group 012 (Return to Vendor). The RTV accounting entry consists of:

• The item's RTV Price. This is the negotiated amount of credit from the vendor for the return of the goods. The RTV price is entered on the debit memo in PeopleSoft Payables.

• The item's cost relieved from the inventory business unit. PeopleSoft Cost Management calculates the cost of returned items based on the depletion costing method that is assigned to the items in the business unit books:

  • The weighted average costing of items uses the cost in effect at the time of the return (depletion). No unweighting of the cost occurs.

  • The standard costing of items uses the standard cost in effect at the time of the return.

  • The actual costing of items with lot or serial cost profiles uses the specific lot IDs and serial IDs on the transaction. The actual costing of items with FIFO or LIFO, uses the next FIFO or LIFO receipt (as predetermined with the vendor), even if the RTV indicates a specific PO or receiver.

• The RTV variance. If there is a difference between the item's RTV price and the cost used to relieve inventory, then an RTV variance is calculated. These RTV variances use the transaction group 415 (RTV Variances) to account for those differences.

Costing Destroyed Material

The Transaction Costing process costs the destroy transaction that is used when you destroy an item instead of returning it and expect a replacement in the same manner as it costs the RTV depletion. The Accounting Line Creation process (CM_ALC) also handles the destroy transaction in the same manner as it accounts for the RTV depletion, using the Transaction Accounting Rules-Accounts page for the RTV transaction group (012 and 013).

Returning Consigned Inventory

When you return a consigned item from a nonowned location, the system assumes that the item is not consumed and is still owned by the consignment vendor. The system therefore makes no accounting entry.

When you return a consigned item from an owned location, the system treats it like a regular owned item. In this case, all costing accounting entries are the same as those for a regular, owned RTV.

Returning Subcontracted Material

Subcontracted material can be returned for replacement or credit:

When you return it for replacement, the system makes no accounting entries other than the recognition of the outside processing costs for the good assemblies. This is handled in the earned labor, overhead, outside processing entry in WIP.

When you return subcontracted material for credit, the system scraps the unacceptable assemblies in production. Since the outside processing costs are not incurred, the assemblies must be scrapped at a cost that includes all material, labor, overhead, and outside processing costs up to that subcontracted operation. It does not include the subcontracted operations costs.

Reviewing an RTV Example

This example displays how RTV accounting entries are created.

1. In the PeopleSoft Inventory/Cost Management, inventory is reduced by the amount of the returned stock using the transaction group 012, Return to Vendor.

2. In the PeopleSoft Payables system, an debit voucher is entered, posted, and extracted. This credit voucher is for the cost of the returned stock plus any additional charges such as restocking fees. This amount may or may not match the value credited to the inventory account.

3. In the PeopleSoft Inventory/Cost Management, the difference between the credit voucher and the inventory stock reduction is recorded as a gain or loss due to RTV using the transaction group 415, RTV Variance.