December 30, 2008 
There is a little known, but very useful transaction type in the Payables module called Return. Every few weeks or so I see a question in the newsgroups or a call comes in from a customer where the answer is to use the Payables Return transaction.
A typical scenario where a Return is needed goes something like this: You receive a check from one of your vendors for a rebate or an overpayment. You either didn’t know it was coming or have not recorded the credit memo yet. So now you need to record the fact that you got cash, you have a lower expense and it would be nice at the same time to record this under the vendor, so that you can see a history of this together with all the other transactions for this vendor.
The Return transaction is perfect for this scenario because it will accomplish everything we want with one transaction. No need to enter a credit memo and debit memo in Payables and a separate Bank Transaction to record the receipt of money.
Below I will walk through the steps of entering a Payables Return in GP 10.0, however the steps are identical in other versions of Dynamics GP. Please click on the screen shots to see them larger/clearer.
Start by going to Transactions > Purchasing > Transaction Entry and changing the Document Type to Return. Enter the Doc Date, Vendor ID, Document Number and any of the other optional fields you’d like to use. Enter the amount you received from the vendor in both the Returns field on the left and one of 3 payment fields on the right, typically this is Check, but it could also be Cash or Credit Card if that’s how the vendor returned money to you. In my example I will enter the receipt of a check:
When you tab off the payment amount you’ll get the Payables Check Entry pop up window, make sure to chose the checkbook where this check will be deposited, in this case I will be depositing this vendor’s check to the FIRST BANK checkbook:
[Note: the check number entered above is the vendor’s check number, similar to how you would enter a customer’s check number on a Cash Receipt in Receivables.]
Next, click on Distributions to make sure they are what you want. The cash account linked to your Checkbook ID will default here with a debit for the CASH distribution type and the Return amount will show as a credit for the PURCH distribution type. (There is no RETURN distribution type in payables.) The PURCH account(s) will default from the Purchases account(s) set up for this vendor, but you can change them as needed, just like on a payables invoice. It is important not the change the Cash account, as that will cause an issue with your bank reconciliation.
Notice there is no distribution for Accounts Payable. This is because we’re not actually entering any change to what we owe this vendor or what the vendor owes us, so the Return transaction will record everything we need and keep history for this under the vendor without actually changing their AP balance.
Once you post this Return transaction Payables inquiry windows will show a transaction with a type of RET – this transaction will be moved to history automatically as soon as it posts, since it’s fully applied right away:
And you will have a new Receipt waiting to be deposited in the Bank Reconciliation module:
This can now be deposited together with any other cash receipts, payables returns or bank receipts.
As easy and straightforward as the Return transaction is, there are a few times when it may not be the right answer. I am sure there are others, but the typical times when not to use a Payables Return are:
- When you have already entered a credit memo for the vendor.
- When you need to enter the return of inventory items.
- When the money you are receiving is not from a vendor.
Victoria Yudin 
Hello,
I followed the steps above for cash received from a vendor I wasn’t expecting, entered a return on the vendor and used deposit with receipts to deposit the check. Now at month-end the PM to GL is out of balance by this amount. Is this to be expected, or do I need to do another step to get the PM/GL to balance?
Thank you!
Amanda
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Hi Amanda,
The return transaction should not be part of the subledger, nor should it have hit the Payables GL account. It should have been a debit to cash and a credit to whatever expense account was appropriate. Can you please check the GL distributions on the transaction and let me know what they were? Also, if you print a detail of the Payables subledger, does this transaction show up on it?
-Victoria
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The GL distributions are cash/expense – not the payables GL. However the transaction is on the subledger. Normally when I have a transaction in payables that does not hit the payables GL there are two entries in the subledger that wash (example: a payable and payment entered at the same time). This one does not have a washing entry.
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Amanda,
The Return is a ‘special’ transaction in the sense that it does not generate multiple transactions as other payables transactions sometimes do. The way that it works is that if there is a payment on it, it does not impact the payables subledger total. What is the Current Transaction Amount showing on the Return transaction? Also, when you say “it is on the subledger” where specifically are you looking? Are you running a report? If so, which report specifically and has it been at all modified, or is it the out of the box GP report?
-Victoria
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The current amount is zero, it’s fully applied. The ‘subledger’ comes from the Reconcile to GL routine in the Financial module, no modifications.
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Gotcha, that explains it. The Reconcile to GL routine is not always accurate, as it does not always properly account for all transactions, especially for older versions of GP (not sure what version you are on). I would not recommend using that routine to actually “reconcile”. I find it only useful to find possible problems. Have you compared the GL balance to the Subledger balance (from the Historical Aged Trial Balance report) for the month?
-Victoria
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I know this is old, but I did not see the scenario I have.
1. Invoice to Vendor A for $400
2. Credit Memo from Vendor A for $700
3. Both transactions 1 & 2 were applied to a credit card.
4. Credit Card company refunded the $300 credit balance with a ACH transaction to us.
#1 is easy, Create an invoice and enter manual payment using credit card.
#2 Created a credit memo, but cannot figure out how to apply it to the credit card. So I voided the credit memo, and tried a return PM transaction using credit card, but it did not show in the credit card vendor.
So right now I have an open Return of $700 in the original Vendor, and an open Invoice of $400 in the credit card vendor.
So I need to get the Return over to the credit card, and then record the ACH payment to us.
Hope you can help.
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Hi Bob,
So you got $400 back on the credit card and $300 in cash? If not, can you please give me more detail? If yes, here is what I would do:
1. Void the Return you entered.
2. Re-enter the Return – the vendor is the original vendor. Then on the bottom right next to Credit Card enter the $400 and select the credit card. Next to Cash enter $300 and select the checkbook where you got the $300.
When you post this, it will show up as a fully applied return under the original vendor and create a $400 credit memo under the credit card vendor. That $400 credit memo can be applied to the original $400 invoice created by your #1 for the credit card vendor. Also, if you are using the bank rec module, you will need to enter a deposit for the $300 receipt – it will be sitting there waiting.
Hope that helps.
-Victoria
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That worked. The only thing is the ACH refund of $300 from the credit card says it is cash, but we can live with that. THANKS
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Victoria, I also find the return payables screen very helpful…
I attempted to void a return, however, I still see it in the bank deposit entry.
What is be best way to clear that out? I have tried deleting the entry as well but GP will not allow me
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Hi Sara,
If you already deposited the original receipt of payment that was entered with the return, the void of the return should have created a negative receipt for the same amount. You can post a deposit with this negative receipt and then, when you reconcile you can check off the original deposit and this negative one and they will cancel each other out.
Hope that helps,
-Victoria
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Hello,
one thing I have noticed is that there is no functionality so far as I can tell to enter a PM return transaction, with no amounts for the check, cash and credit fields; and LATER (as a separate document) enter a receipt from a creditor and apply this to the return. Since GP allows an invoice to be entered, and a payment to be entered and apply the two, it makes no sense that there is no functionality to enter a return, and later enter a receipt and apply the two.
Can anyone let me know if there is anything that I have missed?
thanks
Kemal
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Kemal,
You have not missed anything. It’s just a feature not in the system. If I had to guess why, I would say that is because not too many companies need this and even if they do, it’s pretty seldom. Most of the time, returns or credits are taken against other invoices for the same vendor and there is no need to enter a separate receipt of payment for them.
-Victoria
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How do you do a return on our credit card instead of a check like in the example? I followed the example and applied it to our credit card but am stuck at the step of the “Bank Deposit Entry” it doesn’t pull on Bank Rec module.
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JR,
How is your credit card set up? Typically in payables, credit cards are set up as Vendors. If this is the case, what will happen on a Return is that a Credit Memo will be posted under the credit card vendor.
-Victoria
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They are vendors. It shows the credit memo as open so how do I apply it to the payment? It does not show when I try to Reconcile Bank Statements which is leaving me unbalanced.
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JR,
In GP you apply credits to invoices, there is no way to apply a credit memo to a payment, as they are both ‘credits’.
Typically, for a credit card vendor, you would have a bunch of invoices, then maybe a credit or two…as an example, let’s say there is a total of $5000 in invoices and $100 in credit memos. You would apply the $100 in credit memos to one or more invoices, leaving $4900 in invoices due. You would then send the credit card vendor a payment of $4900. When you enter it in GP, you would apply the payment to the rest of the invoices. In Bank Rec, the only thing you should see is the $4900 payment.
-Victoria
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HI Victoria,
What if I pay the credit card in full and the credit comes the next month on the credit card, yet I have no more charges from the vendor. Staples charges me $300 on Dec 30. Credit card closes on 12.31 and I pay in full on 1/4. on 1/8 I go to staples for a refund of $100 on my Credit card. How do I post this?
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Joe,
You can enter that the same way I am showing here, with Staples as the vendor. At the bottom right, instead of saying you got $100 with a check, you would enter that under the Credit Card and choose the card you used. This will create a $100 credit memo for your credit card vendor reflecting what has happened – you have a $100 credit sitting there.
-Victoria
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Hi Victoria – Similar question as Joe had above but one difference. I am making credit card purchases through the PO module and then Returns are going through the Returns Transaction Entry screen. How would I get the credit to post to the credit card vendor? Thanks!
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Bobby,
I don’t think this is possible with a POP Return Transaction. Only Payables. 😦
-Victoria
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That makes perfect sense, thank you !
And your solution of using a ‘dummy’ credit card linked to vendor works like a charm !
Thanks!
-David
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Victoria,
You’re a life-saver it worked. I was going to apply documents and looking to apply it to the vendor who returned the money, rather than to the Credit Card. Now it worked. Thanks again.
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Thanks Victoria.
Let me back up here a little and use an example.
Advance to employee/vendor:
like a prepayment, we use Manual payment. Let’s say we make a prepayment of $10,000. Posts through to GL as a debit to A/P and credit to Cash with a value of $10,000.
Expense report submitted by employee $7,456:
Posts as a payable invoice from employee with a debit to Expense and credit to A/P with a value of $7,456.
As of this stage, there is a net debit of $2,544 in employee and A/P account which
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David,
Great, working with examples is better. Here is how you can handle this:
-Victoria
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Thanks Victoria,
For the first part of your reply, did you mean a ‘Credit Note’ in Purchasing–>>Transactions–>>Transaction Entry drop down (as opposed to a debit note)? I could not see a Debit note in PM, unless there is something I am missing. Thanks !
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Sorry David,
I was a little tired when writing this yesterday and forgot there is no Debit Memo in Payables. I meant Misc. Charge. Since in this scenario you have an unapplied payment or a ‘credit’ on the vendor account, you need a ‘debit’ to apply it to. That can be either a Misc. Charge or an Invoice in Payables, but I prefer Misc. Charge since it shows that something other than normal invoicing happened.
-Victoria
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Hi Victoria,
We have a slightly different situation & wanted to see if you could suggest something. We have employees setup as Vendors so that their expense reports can be posted to vendor accounts (we use Business portal for EE reports). That part is working fine, and so is the payment to reimburse EEs also. Where we get stuck are two situations:
a) On some occassions, the employee needs an advance to travel, so we use a manual payment and debit the vendor/employee account. if the expense submitted is greater than the advance, we pay the balance to the employee and record as manual payment. However, there are cases where there is a balance remaining and employee settles that by issuing a check to the company. Is there a way we can record that receipt in payable module so that a complete vendor account exists?
b) For international travel, we also issue foreign exchange to the employee in advance. In most cases, the FX is purchased from a vendor and we get an invoice for that. That invioce gets recorded as a payable in PM against the vendor. How can we debit that advance to the employee/vendor account?
Sorry for the longish email !
-Thanks in advance
:-David
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Hi David,
a) If you have already entered the advance as an invoice (instead of just a payment sitting there waiting to be applied), then you could enter a Return Transaction. The cash received can be entered on that same return transaction. If the prepayment was only entered as a payment and a portion of it is sitting there unapplied, then you would need to enter a debit memo for the difference, then enter a Bank Rec receipt to record the cash coming back from the employee.
b) One way to record the FX stuff is with a ‘dummy’ credit card. Set up the vendor you’re actually paying as a credit card, enter the invoice under the EE vendor account and pay it with the FX vendor credit card. This will automatically ‘pay off’ the EE vendor invoice and will create an invoice under the FX vendor for you to pay. Here is some more information on using credit cards in GP: https://victoriayudin.com/2009/01/04/using-credit-cards-to-pay-vendors-in-dynamics-gp/.
-Victoria
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I had a vendor with a credit. We asked for a check for the amount. I deposited the check. I then made a debit memo or misc. charge and applied it to the vendor credit. Now my A.P. is still off by that credit amount. It is like the debit did not apply to the credit. They were in different fiscal years but I don’t think that should affect it.
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Hi Susan,
When you say your AP is off by that amount, what exactly does that mean? What you are you looking at and what is off?
-Victoria
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Exactly what I was looking for! The part I wasn’t doing was tab-ing over to the check side to enter the amount of the refund check.
Thank you, Victoria
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I have a similar issue as described in your example If I follow your instructions, it works perfectly if it only affects payables. My problem is getting this to work in project accounting. Someone had a brief comment about PA and you responded that if it is affects projects you do a project transaction and if not use the payables transaction. I would like the same results that you achieved in your example but also reduce the project by this amount. Can this be done?
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Becky,
It has been a long time since I have worked with Project Accounting, so I cannot answer this for you. I would recommend posting your question on one of the GP forums or asking GP Support about this.
-Victoria
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Nice Article! But what if we are using Project Accounting. Are we stuck with Project -> Returns From Project Entry. ONly-? Since we are dealing with Cost Categories-?
Thank you
H
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Harry,
Yes, if you need to record something for a project, you should use the Project Accounting transactions. If you have a return for a non-project event, then you could use the Payables Return transaction.
-Victoria
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Victoria, why does the Apply button become active when you select Return as the document type if we never need to apply it to anything?
Thanks,
JDM
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JDM,
Let’s go back a step. I said there is nothing to apply in response to your question about the numbering of the payment receipt. You can use a Return payables transaction just like a Credit Memo. Then you would not be entering a payment received and what you’re applying is the Return transaction itself, not the payment for it. In my experience, most companies will enter a Credit Memo in this situation, not a Return. To me, the reason for and the benefit of using a Return Payables transaction is to record the payment received from the vendor at the same time. In THAT case, the payment will automatically be ‘applied’ and there is nothing left to apply. Hope that helps to clarify.
-Victoria
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Victoria, I noticed a payment number in the Payables Check Entry window. This number represents a “receipt” of payment, that is cash in as opposed to making a payment or cash out. But there is no prefix on the number. Is there a way to identify a payment number in Payables to distinguish it as either “cash-in” vs. “cash-out” ? Otherwise just looking a payment number you wouldn’t know if it was cash in or cash out.
JDM
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Jimmy,
There is only one numbering scheme available for payments in the Payables module. However, I do not think this is an issue. This ‘cash in’ will not actually create a separate payables transaction, and you will not be able to see it as separate from the Return transaction. You will also not ever need to apply it to anything since it’s fully applied right away. So I don’t think you’re really not going to be looking at this on any list where you need to identify that this is a ‘cash-in’ situation. In fact, looking at posted Return transactions in our system, I cannot see that payment number anywhere.
-Victoria
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Hi Victoria
Thanks for your reply.
I made a manual payment to my vendor as advance and he didn’t supply the complete material. So he gave me a check for the balance amount. Now I want to decrease his balance and increase my bank. This is my concern.
Thanks again
Abdul Rahman
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Abdul,
If all you have entered so far is a payment to the vendor, you would need to enter 3 transactions now (this is assuming you are using the Bank Rec module):
1. Payables (or POP) invoice for the actual amount of goods received.
2. Payables invoice or misc charge for the difference (which should be the amount of the check the vendor gave you). For the GL distributions on this debit a Suspense account and credit Accounts Payable.
3. Bank Transaction with a type of Enter Receipt for the amount of the check the vendor gave you. The GL distributions here will debit Cash and credit the Suspense account you used in step 2 above.
-Victoria
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Hi
I would like to know how I can handle when the money returned reduces the vendor balance. For example I paid advance but later I cancelled the order and the vendor returned the money.
Thank you
Abdul Rahman
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Abdul,
When you say that you “paid advance”, what are all the transactions that you have recorded in GP for this?
-Victoria
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Victoria,
Sorry, Actually the unapplied amount is shown against payment which was made in excess to Vendor not return transaction.
– Abu Owais
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Abu,
If a payment has an unapplied amount, you have 2 choices:
1. Apply it to an existing Invoice, Finance Charge or Misc Charge transaction by going to Transactions > Purchasing > Apply Payables Documents.
2. If there is nothing to apply it to, you can create a new transaction (I would recommend using Misc Charge in this case) for the unapplied amount, post it, then apply the amount remaining on the payment to it.
-Victoria
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This article helped me but the vendor history is showing a return document which has an unapplied amount.
Is there any way I can get rid of that return transaction.
Thanks
Abu Owais
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Abu,
Are you able to apply the return to an invoice?
-Victoria
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Thanks for publishing such articles very useful and nice to know.
Farooque.
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Simple yet elaborate and complete.
I had been wondering on how easy I could learn the functionalities, but now I have a means to achieve that.
Thanks
Vaidy
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