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There are various ways that a company can expect their vendors to compensate them in case they are dissatisfied with the received order or on behalf of their own customers. The terms of a compensation agreement reached between the company and the vendor will often depend on the reason for the return and the company-vendor relationship. For instance, the parties may agree that in case of wrongly ordered/delivered item(s) the company returns the item to the vendor against receiving a credit and receives a replacement item instead. In other situations, for example, where an item arrives at the company damaged, the company may require a price deduction against the original purchase order price. The same may be applied when a company provided a sales allowance for their own customers and now wants to recover costs by requesting a purchase allowance from their vendor. Meanwhile, where the purchased item has a warranty, the company may ask the vendor to repair the malfunctioning or broken item.
The purchase return order is the central document that allows the user to register a compensation agreement settled with the vendor. From here, the user can access other purchase-related documents, and enter and maintain the return-related information concerning the vendor, the method of compensation, and the items in question.
Purchase Returns are used to ensure that your company is compensated for incorrect or damaged items. See About Returns Management for more information.
The following are the standard steps in creating a basic purchase return order. A basic return order is created when you simply want to return an item to a vendor for credit. Additional return options are described below.
On the Invoicing tab, you can apply the return order to the associated purchase invoice by filling in the Applies-to Doc. Type and Applies-to Doc. No. fields.
By shipping and invoicing the return order, a posted purchase credit memo is created.
If the associated invoice was not applied earlier in the process, this application can take place after posting.
The following options can be used in conjunction with basic processing steps outlined above.
If you want to revalue inventory using the unit cost that is connected to the original purchase entry, assign Exact Cost Reversing.
You may need to create a purchase allowance if you and your vendor agree to accept compensation for a returned item in the form of a deduction from the original purchase order cost.
You may need to create a replacement purchase order if your vendor agrees to replace a returned item. The replacement item can be the same or it can be different.
In some cases, you may want to return a specific serialized item or lot. For instance, a particular item or lot is defective or has been recalled. For these situations, the program allows you to find the item using the serial number and allows the return of that specific item or lot.
Locate the serial/lot numbers from the vendor.
Select the line that you want to select serial/lot numbers for.
Click the Line button and then select Item Tracking Lines.
In the Item Tracking Lines
window, click the AssistButton 
in the Lot No. or Serial No. field to select from the
Item
Tracking Summary window.
You can create all return-related documents at the same time from the Sales Return Order window. Alternatively, you can create all the documents individually.
For items that have been shipped but not yet invoiced:
There may be times when you need to return to your vendor several items that are covered by different purchase return orders. Once the items have been shipped and before you invoice, you can use the Get Return Shipment Lines function to create one purchase credit memo for all of the shipped items.
If a return order has been shipped but the item is subsequently rejected, you must create a corrective purchase invoice to complete the return order transaction.
Creating Purchase Credit Memos