Crediting sales is something that happens no matter how hard you try and have your invoices correct, your goods shipped in correct amounts and items. There’s a factor you cannot monitor and that’s you customer for instance. They may decide they want something else, something additional and so on. Thus it’s important to understand that crediting sales is absolutely normal and it’s even more important to understand how one should do it instead of avoiding it.
Say that your customer decided that they don’t want part of the shipment (or it was wrong) and they’re sending it back. You now have to show that your sales were in fact less by the amount the customer sent back. Your initial sales amount was say 1,000 CU and 300 CU of it was in fact sent back. Your accounting entries are as follows:
|Credit||Cost of goods sold||200|
With the first entry it should be obvious, you account for the sales credit alongside with decreasing the receivable as well. The second entry however is something that should be done if those goods are still able to be sold. They’re thus taken into your inventories and as you didn’t sell them, you take back the cost you initially recognized alongside with the sale.