welcome back to the channel in the video today i will start explaining the sales returns process and the related accounting entries i am recording this video while traveling so today i don't have all my equipment i don't have my light i don't have my studio but i'm committed to publishing one or two videos every week so i have to record this video even though i'm traveling so i hope you don't mind the noise because there are some noise or there is some noise from the room that i'm in there's also some noise from the neighbors so i hope you don't mind this and i hope you enjoy watching the video there are too many variations for the sales return process for example we can return something against a refund or against a replacement of the same product or a replacement of another product and in some cases we don't even ask the customer to return the products and we ask him to scrap the products at his site and we do the refund because the cost of sending the products back is more expensive than the sales process itself for example so there are too many variations today i will go with the very basic and the very simple one which is a normal sales return against for refund the process will start with the creation of a return sales order which is normally created with reference to the original sales order that we did to the customer so it will have the same details as the sales order such as the customer code the product code that is being returned the quantity and many other details and based on this return order we are going to create an inbound delivery which is a note that we send to the warehouse team so they are prepared to receiving the products from the customer and based on the inbound delivery the warehouse team is going to post a goods receipt when they actually receive the products but when we receive the products we are not going to put them with the other products that we sell to other customers so they are not yet free to be sold or used because these items we just received from the customer and we have to check that everything is okay before we can put them back in the market so after we do the goods receipt the quality team is going to perform a quality inspection to confirm that the products are okay and based on the quality inspection we can have two results either the products are okay so the packaging is okay and the product can be sold again or the products are not okay and if the products are okay we can move them back to the normal stock and they can be used again normally like any other item we have but if the products are damaged in this case we can either scrap them we can send them to a vendor to the vendor that sold them to us or we can actually send them back to the customer so there are too many variations today i will go with the case that the quality inspection is okay and the products are okay and will be used again as normal stock once the quality team confirms that the products are okay the sales team can create a credit meme request which is then converted into a credit memo now let's look into the accounting entries in every step when we create the returns order and the inbound delivery we don't have any financial entries then we have our first financial entry in the process for the goods receipt which is a debit to the inventory account and the credit to cost of goods sold and this financial entry can either be posted when we actually do the goods receipt in the warehouse or after we do the quality inspection and we confirm that the products are okay so in some cases we would receive the product from the customer in the warehouse but we're not going to post any financial entries because we don't want to be legally responsible for these products they still belong to the customer so we're not going to post an accounting entry until we confirm that the products are okay and once we move them to the free stock here we are going to post the goods receipt financial entry in some other cases we would say that once we receive the product from the customer we want to post the financial entry that the products belong to us and then if we find that something is wrong when we do the quality inspection then we decide what we are going to do so we can either scrap the products and post a financial entry or we send them back to the customer and we post a goodz issue financial entry there are too many cases then in the credit memo request we don't have any financial entries it is a stellar request and after we convert the request into a credit memo here we have the last financial entry which is a debit to the sales account or a sales return account and that credit to the customer accounts receivable this is it for the basic sales returns process i am not sure if i will explain all the different variations such as the returns against a replacement or the returns and sending the product back to the vendor and so on it all depends on you so after the video i'm going to create a poll on the community page on the youtube channel and i want you to vote whether you want me to explain the different variations of this process or whether this is enough and i should move to other processes remember that i only publish one or two videos every week so if you decide that i explain the other variations of the sales returns process it means that i will explain them over the next videos otherwise if you are not interested you can ask me to move on and handle other topics in the next video i'm going to demonstrate this process on sap s4hana using the advanced sales returns program the video will be released next week but as usual i will give early access to the channel members so if you are interested in checking the demo today for the advanced sales returns you can click on this link thank you for watching and i'll see you in the next video