Ceravolo Consulting

Doral, FL

Difficulty Level: Beginner Level AccountMate User

Version(s) Affected: AccountMate 7 for SQL and Express
AccountMate 6.5 for SQL and MSDE

Module(s) Affected: Return Merchandise Authorization and Return to Vendor Authorization

DESCRIPTION

If your company is engaged in purchasing and selling products, you may encounter situations that result in customers returning the previously sold items or returning to vendors your previously procured items. AccountMate's Return Authorization module allows you to accrue liability to customers upon receipt of sales returns and shipment of replacement or substitute items; and to reverse the accrual upon completion of the transaction (i.e., recording the Complete RMA transaction). In the process of shipping to a customer the replacement, substitute, or repaired item whose unit cost is not equal to the return cost; Ship RMA gain or loss will arise.

The Return Authorization module has the capability to reduce the Accrued Received Goods Liability GL Account ID balance that was increased upon receipt of items purchased from vendors set to accrue received goods. The Accrued Received Goods Liability GL Account ID balance may increase again upon receipt of the replacement, substitute or repaired item from vendors. RV Gain/Loss may arise from the following instances:

  • Upon shipment of items back to vendors (if the return cost is not equal to the actual cost);
  • Upon receipt of replacement, substitute or repaired items (if the receive cost is not equal to the return cost); or
  • Upon completion of the transaction or recording the Complete RTV transaction involving a Credit action (if the unit price entered in the Complete RTV function is not equal to the return cost).

Verifying the Accrued Received Goods Liability GL Account ID balance may be taxing if you do not know which transactions possibly affect it. Equally difficult is verifying the RA/RV Gain or Loss amount if you do not know when the gain/loss arises and how it is calculated. This document displays matrices to help you better understand each RA/RV transaction's effect on the Accrued Received Goods Liability GL Account ID balance. It also shows the formula AccountMate uses to calculate the RA/RV Gain (Loss) amount when recording certain RA/RV transactions using various return codes.

SOLUTION

It is best to first understand the following terms used in the matrices:

  • RA Return cost - estimated default cost of one returned unit that will be added back to inventory. The default return cost comes from any of the following:
    • Unit cost on the AR invoice - if the RA order is created by copying entries from an AR invoice.

    • Return cost specified in the inventory item record's Return Cost field - if the RA order's line item is manually added in the Create RMA function.

    • System-calculated average cost displayed in the inventory item record's Average Cost field - if no return cost is specified in the inventory item record.

    Note: If no AR invoice was referenced for the RA order, you can amend the default return cost in the Create RMA function, specifically in the Line Item tab's/Line Item Detail window's Unit Cost field.

  • RV Return cost - estimated default cost of one unit returned to the vendor. The default return cost comes from any of the following:
    • PO receive cost - if the RV order is created by copying entries from a Purchase Order.

    • RA return cost - if the RV order is created by copying entries from an RA order.

    • Return cost specified in the inventory item record's Return Cost field - if the RV order's line item is manually added in the Create RTV function.

    • Zero - if no return cost is specified in the inventory item record.

    Note: You can amend the default return cost in the Create RTV function, specifically in the Line Item tab's/Line Item Detail window's Unit Cost field.

  • Actual cost - is the system-generated item's unit cost displayed in the inventory item record's Average Cost field. The cost method assigned to the inventory item is taken into consideration. If the inventory item is assigned the Average Cost method, its actual cost is equal to its average cost. If the inventory item is assigned the First-In First-Out (FIFO) cost method, the actual cost is equal to the cost of the oldest unit on hand.

  • RA order cost/RV order cost - is the unit price or unit cost entered in the Create RMA or Create RTV function. The default RA order cost/RV order cost depends upon the pricing hierarchy; you can amend the default cost during creation of the RA order/RV order.
  1. RA Transactions that affect the Accrued Received Goods Liability GL Account ID Balance and Formulae for Calculating Ship RA Gain/Loss

    RA Return Code % RA Transaction Effect on Accrued Received Goods Liability Formulae for calculating Ship RA Gain/Loss
    Restock and Credit Create RMA N/A N/A
    Receive RMA Increase
    (equal to the return cost)
    N/A
    Ship RMA N/A N/A
    Complete RMA Decrease
    (reversal of the accrual)
    N/A
    Restock and Replace Create RMA N/A N/A
    Receive RMA Increase
    (equal to the return cost)
    N/A
    Ship RMA Increase
    (equal to the difference between actual and return costs)
    Ship RA Gain (Loss) = Returned item's actual cost - return cost
    Complete RMA Decrease
    (reversal of the accrual)
    Note: Reverse the Ship RA Gain/Loss
    Restock and Substitute Create RMA N/A N/A
    Receive RMA Increase
    (equal to the return cost)
    N/A
    Ship RMA Increase
    (equal to the difference between the substitute item's actual cost and the returned item's return cost)
    Ship RA Gain (Loss) = Returned item's return cost - Substitute item's actual cost
    Complete RMA Decrease
    (reversal of the accrual)
    Note: Reverse the Ship RA Gain/Loss
    Discard and Credit Create RMA N/A N/A
    Receive RMA Increase
    (equal to the return cost)
    N/A
    Ship RMA N/A N/A
    Complete RMA Decrease
    (reversal of the accrual)
    N/A
    Discard and Replace Create RMA N/A N/A
    Receive RMA Increase
    (equal to the return cost)
    N/A
    Ship RMA Increase
    (equal to the difference between the replacement item's actual cost and the returned item's return cost)
    Ship RA Gain (Loss) = Item's actual cost - return cost
    Complete RMA Decrease
    (reversal of the accrual)
    Note: Reverse the Ship RA Gain/Loss
    Discard and Substitute Create RMA N/A N/A
    Receive RMA Increase
    (equal to the return cost)
    N/A
    Ship RMA Decrease
    (equal to the difference between the substitute item's actual cost and the returned item's return cost)
    Ship RA Gain (Loss) = Substitute item's actual cost - returned item's return cost
    Complete RMA Increase
    (reversal of the accrual)
    Note: Reverse the Ship RA Gain/Loss
    Repair and Reship Create RMA N/A N/A
    Receive RMA Increase
    (equal to the return cost)
    N/A
    Ship RMA Increase
    (equal to the difference between the actual and return costs)
    Ship RA Gain (Loss) = Item's actual - return cost
    Complete RMA Decrease
    (Reversal of the accrual)
    Note: Reverse the Ship RA Gain/Loss
    Repair and Credit Create RMA N/A N/A
    Receive RMA Increase
    (equal to the return cost)
    N/A
    Ship RMA N/A N/A
    Complete RMA Decrease
    (Reversal of the accrual)
    N/A
    Repair and Replace Create RMA N/A N/A
    Receive RMA Increase
    (equal to the return cost)
    N/A
    Ship RMA Increase
    (equal to the difference between the replacement item's actual and defective item's return costs)
    Ship RA Gain (Loss) = Item's actual - return cost
    Complete RMA Decrease
    (Reversal of the accrual)
    Note: Reverse the Ship RA Gain/Loss
    Repair and Substitute Create RMA N/A N/A
    Receive RMA Increase
    (equal to the return cost)
    N/A
    Ship RMA Decrease
    (equal to the difference between the substitute item's actual cost and the returned item's return cost)
    Ship RA Gain (Loss) = Substitute item's actual cost - returned item's return cost
    Complete RMA Increase
    (Reversal of the accrual)
    Note: Reverse the Ship RA Gain/Loss
  2. RV Transactions that affect the Accrued Received Goods Liability GL Account ID Balance and Formulas for Calculating RV Gain/Loss

  3. Transactions that affect the RV Accrued Received Goods and RV Gain/Loss GL Account ID balances

    RV Return Code RV Transaction Effect on Accrued Received Goods Liability Formulas for calculating RV Gain/Loss
    Return for Credit Create RTV N/A N/A
    Ship RTV Decrease
    (equal to the RV order cost, net of freight)
    Ship RTV Gain (Loss) = RV order cost -Returned item's actual
    Receive RTV N/A N/A
    Complete RTV None N/A
    Return for Replacement Create RTV N/A N/A
    Ship RTV Decrease
    (equal to the returned item's RV order cost, net of freight)
    Ship RTV Gain (Loss) = Returned item's actual cost - RV order cost
    Receive RTV Increase
    (equal to the replacement item's receive cost, plus freight)
    Receive RTV Gain (Loss) = Replacement item's actual receive cost - RV order cost
    Complete RTV N/A N/A
    Return for Substitution Create RTV N/A N/A
    Ship RTV Decrease
    (equal to the RV order cost, net of freight)
    Ship RTV Gain (Loss) = Returned item's RV order cost - actual cost
    Receive RTV Increase
    (equal to the substitute item's receive cost, plus freight)
    Receive RTV Gain (Loss) = Returned item's RV order cost -Substitute item's receive cost
    Complete RTV N/A N/A
    Return for Repair Create RTV N/A N/A
    Ship RTV Decrease
    (equal to the RV order cost, net of freight)
    Ship RTV Gain (Loss) = Returned item's actual cost - RV order cost
    Receive RTV Increase
    (equal to the repaired item's receive cost, plus freight)
    Receive RTV Gain (Loss) = Repaired item's receive cost - RV order cost
    Complete RTV N/A N/A
    Repair and Credit Create RTV N/A N/A
    Ship RTV Decrease
    (equal to the RV order cost, net of freight)
    Ship RTV Gain (Loss) = Returned item's actual cost - RV order cost
    Receive RTV N/A N/A
    Complete RTV None N/A
    Repair and Replace Create RTV N/A N/A
    Ship RTV Decrease
    (equal to the RV order cost, net of freight)
    Ship RTV Gain (Loss) = Returned item's actual cost - RV order cost
    Receive RTV Increase
    (equal to the replacement item's receive cost, plus freight)
    Receive RTV Gain (Loss) = Replacement item's receive cost - RV order cost
    Complete RTV N/A N/A
    Repair and Substitute Create RTV N/A N/A
    Ship RTV Decrease
    (equal to the RV order cost, net of freight)
    Ship RTV Gain (Loss) = Returned item's RV order cost - substitute item's actual cost
    Receive RTV Increase
    (equal to the substitute item's receive cost, plus freight)
    Receive RTV Gain (Loss) = Returned item's RV order cost - substitute item's receive cost
    Complete RTV N/A N/A

Determining which transactions affect the Accrued Received Goods Liability GL Account ID balance and knowing how AccountMate calculates the Gain (Loss) from Ship RMA, Ship RTV, Receive RTV, or Complete RTV certainly help especially during account verification, account reconciliation, and evaluation of customer and vendor returns.

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