The two different ways to handle warranties are:

1. To estimate the amount the supplier will give you for the claim and give that to the customer straight away
   
2. To charge the customer the full value for any replacement stock and pass on credits once you have received them from the supplier
   

In either case, what you receive back from the Supplier may either be a Credit Note or replacement stock. We will also look at how to handle this.

Method 1: Estimate the amount the Supplier will give you

If you estimate the amount you believe you will receive back from the supplier simply tick the Warranty Adjustment tick box and enter the % of tread remaining (100% for full warranty return). This will discount the selling price by the % of tread remaining, thereby only charging the customer for the amount of tread used.

The system will also apportion the same percentage of the cost to the Suppliers Accrued Payables. This will help you manage what is owed to you from suppliers for warranties.

If you receive a Credit Note back from the Supplier for the warranty this is processed in Suppliers>>AP Invoice Entry as a Credit Note. Given you estimated the amount you were going to get back, the credit note may be for more or less than the amount in Accrued Payables. Regardless of this, in the distribution section of the credit note you must clear the document in Accrued Payables created when the Warranty Adjustment tick box was used. GST is accounted for and then any difference can be coded appropriately.

See below for instructions on how to process if replacement stock is supplied by the supplier for this warranty.

Method 2: Pass on a credit to the customer when you receive a credit from the supplier

If you choose to pass on a credit note to the customer after you receive a credit note from the supplier you will invoice the customer at full price for the replacement goods.

When the credit note is received from the supplier, process it onto the suppliers account from Suppliers>>AP Invoice Entry and code to the Customer Warranty Holding Account General Ledger.

Now a credit note can be processed to the customer from Order Entry>>Credit Notes. Use the Warranty Special Item as it is linked back to the same Customer Warranty Holding Account General Ledger code.

 

If you receive replacement stock instead of a Credit Note from the Supplier

In either of the above situations instead of a credit notes you may receive replacement stock at a reduced price or for no charge from the supplier. In this process a Quantity On Hand (QOH) Adjustment from Inventory>>Item Maintenance>>Stocking Tab. Accept the price that comes up to cost the item.

Now process the Suppliers invoice in Suppliers>>AP Invoice Entry and in the distribution area code it back to the Suppliers Accrued Payables and tick off against the original sales invoice where you used the Warranty Tick Box.

Tick the Pay box and ensure that the Applied Amount is the same as the amount Owing (it will be a negative value). Answer Yes to the warning about any unapplied amounts

Change the value on the second line to match the GST that you have been charged and code to GST Claimable.

Any difference between the value the QOH Adjustment was done for and the value of this Suppliers invoice will be left on the third line. Code this to the Stock Variance General Ledger and delete the tax code.

FOC Replacements

When replacement items are sent free of charge, the same process is followed. The AP Invoice in processed for $0.00 and there will be no GST line in the distribution. The amount on the first row will be the negative of the amount in the second row.