Scrap Damaged Inventory

This document explains the procedure to follow when inventory has been damaged, but the vendor isn’t going to give you credit for it. 

This process includes creating & posting a Shipper in the PO module to take the items out of inventory.  Then posting a vendor credit memo for those items.  The purchased item history will show the items returned to the vendor.  Since these damaged items aren’t actually returned to the vendor, it might be a good idea to create a vendor called “DAMAGED/SCRAP INVENTORY”. 

STEP 1

Create Vendor: DAMAGED/SCRAP INVENTORY

Go to:

• Accounts Payable (Module 3)
  • Vendor Master (Task 17)
    • Enter new vendor (Sub-task 1)
    • If you have multiple divisions the vendor # should be over 99.  To be able to run reports by vendor # and exclude the DAMAGED/SCRAP INVENTORY vendor and the division vendor #’s, use vendor #100.  Then vendor & purchasing reports may be printed starting with vendor #101.

STEP 2

Go to:

• Purchase Order (Module 7)
  • Ship-back entry & editing (Task 4)
    • Enter new shipper (Sub-task 1)
      • Create a new Shipper using the vendor #100 Damaged/Scrap inventory.  
      • Put the damaged items & quantities on the shipper.  
      • When the Shipper is correct the Action “Post shipper” should be selected.  '
      • The quantities will be taken out of the Inventory control (Module 5), Warehouse master (Task 19), Qty on hand (Field 3).  
      • This shipper should be printed & put in a folder so the shipper # can be used in the next step.

STEP 3

Go to:

• Purchase Order (Module 7)
  • Vendor CR-memo entry & editing (Task 5)
    • Enter new credit-memo (Sub-task 1)
      • Screen prompt:
        • 01 Vendor #:  l00 Damaged/Scrap inventory
        • 02 Credit-memo#: DAMAGED
        • 03 Cr-memo date: Use a date of the current period
        • 04 Terms: Enter key for default
        • 05 Due date: Enter key for default
        • 06 Warehouse #: Use the warehouse # the items are coming out of.
        • 07 Merchandise$: Zero
        • 08 Sales tax: Zero
        • 09 Freight: Zero
        • 10 Oth amount: Zero
        • 16 Non disc amt: Zero
        • 17 PPay discount: Zero
        • 18 Reference #: ABC123XYZ098
        • 19 Pre-paid: N
        • 20 Disc taken:

      • Obtain shipped items list? Y

      • Shipper#: Type in the shipper # posted in step 2.

      • Enter key through the quantities and cost $, making sure they are correct.  See NOTE & ADDITIONAL NOTE below.

      • G/L Distribution / Action SCREEN:

        • Total distribution: amount on the bottom of the screen should be zero.

        • The G/L account #’s should be the inventory G/L account #’s.  One G/L account # should have a negative for the total cost of the items.

        • If everything is correct, select Action: 3=Post/Voucher.

        • Jot down the voucher # assigned.

        • Print voucher? Y

        • The printed voucher should be stapled to the printed shipper from step 2.  These can be filed in a DAMAGED/SCRAP INVENTORY file.  The voucher credit memo is now posted to A/P (Module 3)

NOTE: The cost of the items returned will update the Inventory control (Module 5), Item master (Task 17), Average cost (Field 7). 

ADDITIONAL NOTE: In order for the Inventory control (Module 5), Item master (Task 17), LAST cost (Field 8); OR the Supplier master (Task 18), Last cost (Field 9); to be updated a parameter needs to be checked. To see this parameter go to:

• Purchase order (Module 7)
  • System management functions (Task 32)
    • Modify parameter files (Sub-task 22)
      • Credit memo entry (5)
        • DFLT’CHG’FLG= set this parameter to a Y or N to determine if P/O vendor credit memos will update the last cost in the Item master and the last cost in the supplier master.

STEP 4

Go into

• Accounts Payable (Module 3)
  • Voucher entry & editing (Task 1)
    • Change existing transaction (Sub-task 2)
    • Bring up the assigned voucher # from above
    • Find the negative amount in field 12-20 Exp Acct #.  Change this G/L account # to your G/L account # for Damaged inventory
    • Field 4 Inv amount: should be zero
    • If needed put a note in field 9 reference#
    • Print an edit list, verify, & post as normal.

AFFECT ON G/L:

After month end is completed, balanced & the A/P to G/L interface has been obtained & posted into the G/L module the affect in G/L will be a credit to inventory and a debit to the Scrap/Damaged inventory G/L #.

* If the vendor is going to give you credit for the inventory, this would all be done with the vendor # that is giving the credit, not the DAMAGED/SCRAP INVENTORY vendor.  Step 3 Vendor CR-memo entry & editing would be done when the credit memo is received from the vendor. The amount on the credit memo would NOT BE ZERO.  The amount on the vendor credit memo would be the amount the vendor allows.