Module 2 · Core · 9 min read

Sales returns and credit notes

You will be able to: Create a sales return against an invoice and calculate the credit note total; Write the ledger entries of a return, including restocked goods; Explain Restock versus Scrap and what a return does not do.

  • Read not done yet
  • Self-check: not taken not done yet
  • Lesson complete not done yet

When a customer sends goods back, you cannot edit the original invoice. You issue a sales return. In Zeyto it is issued as a tax credit note: it reduces the sale, reduces the VAT you owe and credits the customer's account. Under UAE VAT rules a tax credit note should be issued within 14 days of the event that gave rise to it, such as a return.

Starting a return

  1. Open Sales, then Sales Invoice, find the submitted invoice and press Convert on its row. Sales Return is the only choice.
  2. Tick the lines coming back and lower the Quantity to carry for a part return, then press the Create button.
  3. The return opens with the invoice's lines, prices and tax codes. Check the quantities.
  4. Press Submit. The return is numbered and, with the usual setting, the credit note opens.
A submitted sales invoice with the More menu open showing the option Create Sales Return.

Open the submitted invoice, then More, Create Sales Return.

Open the submitted invoice, then More, Create Sales Return.

You cannot return more than was invoiced: a line pulled from an invoice is limited to the quantity not yet returned.

Restock or Scrap

Each line starts on Restock. Restocked goods go back into the warehouse at the cost they left at. Scrap lines do not go back into stock. To choose Scrap, press Columns and tick Return Reason / Action. Without an invoice you must give every line a Reason (one word, such as DAMAGED) and Restock or Scrap.

What a return posts

Two of ten bags come backThe invoice sold 10 bags at AED 50 plus 5% VAT (total AED 525). The customer returns 2 bags. Net value: 2 x 50 = AED 100. VAT: 5% of 100 = AED 5. Credit note total: AED 105. Sale and VAT: Debit Sales Returns 100; Debit VAT Output 5; Credit Trade Receivables 105 (tied to the original invoice, so its Outstanding goes down). Stock (if Restock, average cost AED 30): Debit Inventory 60 (2 x 30); Credit Cost of Goods Sold 60. The customer owes AED 105 less, your output VAT falls by AED 5, your net sales fall by AED 100 and your cost of sales falls by AED 60, so profit falls by AED 40 (the margin on 2 bags).
The Sales Returns register listing the credit notes issued with customer, total and status.

Sales, Sales Return: each return is a tax credit note.

Sales, Sales Return: each return is a tax credit note.

If you scrapped the 2 bags instead, the Sales Returns, VAT Output and Trade Receivables entries are the same, but there is no Inventory debit and no COGS credit: the cost stays as an expense because the goods are gone.

What a return does not do

  • It does not pay money out. It credits the customer's account. If the customer had already paid in full, they now hold a credit of AED 105 on their account.
  • It does not change the original invoice. Both stay on record, linked in the Document trail tab.
  • It cannot be saved in a VAT period you have already filed.

Cancel and amend

Amend reverses what the return posted and posts the corrected version with a suffix such as /A1. Cancel reverses everything: the customer owes what they owed before and the quantities become open on the invoice again.

TipOn the Sales Invoices list, the Flow column of an invoice that has returns reads Partially Returned or Returned.
Watch outA return without an invoice needs a customer and a Reason on every line, and you type the Qty and Rate yourself. Whenever possible start from the invoice so prices, discounts and tax codes carry over exactly.

Try it in the demo

  1. Open https://demo.zeyto.app/demo-app/ and sign in (user admin, password demoAdmin123). This is a public demo with sample data, so nothing you do there affects a real business.
  2. Open Sales, then Sales Invoice, find a submitted invoice and press Convert on its row.
  3. Lower one line's Quantity to carry to 1 or 2 and press the Create button. Read the Totals box: check the VAT is 5% of the net.
  4. Do not submit in the demo. Instead open Sales, then Sales Return and look at an existing return's Postings (More, then Postings).
Open the live demo

Public demo company, sign in as admin / demoAdmin123. Data refreshes nightly.

Key takeaways
  • A sales return is a tax credit note: it reduces sales, VAT and the customer's balance.
  • Two of ten bags at AED 50 plus 5% VAT is a credit note of AED 105.
  • Restock puts goods back at cost; Scrap does not. A return credits the account and pays no cash.

Check yourself

4 questions on this lesson. Not timed, not the exam, and you can try again. Score 60% or more, and read the lesson, to complete it.

1. In Zeyto a sales return is issued as a tax credit note.

2. A customer returns 2 of 10 units sold at AED 50 plus 5% VAT. What is the credit note total?

3. Two damaged units are returned and you choose Scrap. Compared with Restock, which entry is missing?

4. A customer paid an invoice of AED 525 in full, then returns goods worth a AED 105 credit note. What is the result?

Previous: Receipts: collecting what customers oweNext: Customer statements and receivables ageing

Practice questions for this module · Printable study sheet