Stand Alone Credit Memo
If you return an item and create a standalone credit memo rather than a return authorization, the quantity is added back to inventory. However, the value of the item is not credited to the Cost of Goods Sold (COGS) account of the item. Issuing a standalone credit memo for a return can result in inaccurate costing for the item.
Best Practice
Always use the return authorization process to return items to inventory to maintain accurate costing. When you use the return authorization process, costing is sourced from the originating sales order or invoice. Then, creating the credit memo from the originating transaction retains the link for costing. For more information, see Vendor Return Authorization Overview.