Revenue Recognition for Customer Return in SAP Business ByDesign
In this blog post I have explained how the Revenue is Recognized for the Revenue type ‘Customer Return’ with Credit Memo when the Accrual Method is “Recognized at the Point of invoice”
What is Customer Return?
Customer Return Processing is the management of products that are returned by customers. Products can be returned for a credit, replacement, or repair.
Navigate to Business Configuration >Choose the Open Activity List > Edit Project Scope > Make Sure that the Sales Order and Customer Return is in scope.
Make sure that the Sales and Profit Analysis under Financial and Management Accounting is in scope in the Business Configuration.
Enable the question “Do you want to use solution supported revenue recognition for sales order” in the Business Configuration.
Assign the Accrual Method for the Revenue type “Customer Return” in the finetuning activity “Edit Accrual Method Determination”.
Enter the relevant GL accounts in the Chart of account and account determination for deferred net value , Deferred sales returns and Deferred Cost of Goods Sold on the Revenue Recognition- Deferrals tab of the Sales subledger. These accounts must be of the type ACLEAR > Accruals/Clearing.
Enter the accounts for Accrued Net Value, Accrued Sales Returns, and Accrued Cost of Goods Sold on the Revenue Recognition – Accruals tab of the Sales subledger .These accounts must be of the type ACLEAR – Accruals/Clearing.
Navigate to Sales order work center > Create new sales order > Enter all the mandatory details and click on Save
Release the sales order
Navigate to Outbound Logistics Control Workcenter > Customer Demand > Search for created sales order > Release the customer Demand
Navigate to Outbound Logistics Workcenter > search for created sales order > click on Post Goods Issue in order to outbound the goods to customer
Click on Propose Quantity and Release the outbound delivery
Navigate to Customer Invoicing Workcenter > Invoice request > Search for outbound delivery invoice request > Click on Invoice
Release the customer invoice
Journal entry posted for Customer invoice
Navigate to Sales Order Workcenter > Under Common task Create New Customer Return Notification with the reference of sales order
After entering all the details check the “Customer return notification” document for consistency
Once the document is consistent Click on finish
Click on “Post Goods Receipt for Customer Return Notification Document’” by doing which the company is going to receive the return quantity from the customer.
In the Inbound Delivery Document Click on Propose Quantity to update actual quantity which will directly go to the target scrap area > save and close the document .
Journal entry posted for customer return
The “Customer Return” document is created in the document flow of Customer Return Notification or we can find it in the returns view of sales order work center
Enter the Credit Memo quantity and Release Customer Return document with Credit Memo
Navigate to Customer Invoicing workcenter > Search for Customer Return Invoice Request in the Invoice Request view and click on invoice
Release the Credit Memo
Journal entry posted for Customer Credit Memo where Returns are posted to the Deferred Sales Returns account. This account is a balance sheet account, which means the returns are not yet recognized.
Navigate to Cost and Revenue Workcenter > Sales document items view > Search for Customer Return Document > Click on Execute revenue recognition. Under Accounting data tab we can see the Accrual method “Recognize at point of Invoice” is assigned to corresponding Customer Return document .
Enter all the mandatory details and click on ok
Journal entry posted for Revenue Recognition where if the credit memo has been posted, the revenue reduction and the reduction of the cost of sales are recognized. Returns are posted from the Deferred Sales Returns account to the Sales Returns account.
Have a look at my previous blog posts on ‘Revenue Recognition for Product Sales and Project sales in SAP Business ByDesign’ mentioned below