Lesson 4 of 5
Inventory and finance effects
10 min
A process owner signs off returns and memos on their results: what happened to stock and what happened in the books. This lesson walks through each document's effect so you can predict the result before you test it, which is the whole point of an expected result.
| Document | Stock effect | Typical finance effect |
|---|---|---|
| Return order | None | None |
| Returns goods receipt (standard, into blocked stock returns) | Quantity increases in a non-valuated returns stock | Usually none, because the stock is not valuated |
| Transfer from returns stock to unrestricted | Quantity moves to valuated, available stock | Inventory value posted; offset per account determination |
| Credit for returns | None | Customer credited; revenue (or a sales deduction account) and output tax reversed |
| Credit memo | None | Customer credited; revenue or sales deduction and tax reversed |
| Debit memo | None | Customer debited; additional revenue and tax posted |
Stock: where to look
To see returned stock, open the Stock – Single Material app or MMBE for CMC-ALT-100 in plant 1710 and look for the returns stock line. The goods receipt itself is a material document you can display with MIGO or the Material Documents Overview app, reached from the returns delivery's document flow. Check three things: the movement type, the quantity, and the stock type it posted to.
Because blocked stock returns is not valuated in the standard design, the returns goods receipt usually creates no accounting document. That surprises testers who expect a journal entry for every goods movement. It is not a defect in the standard flow; the value arrives when the goods are transferred into valuated stock after inspection.
How returned goods are valued
When good units move into unrestricted stock, they take on the material's valuation price. For CMC-ALT-100 at Detroit that is the standard price of $150, so four units returned to stock add $600 to inventory. If the product were valued at moving average price, the posting would follow that price instead, and the moving average could shift. Units that are scrapped never add value; their cost was already expensed as cost of goods sold when they were shipped.
- Day 1Return orderFour units, reference invoice 90001877; no stock or finance effect
- Day 5Returns goods receiptFour units in blocked stock returns at plant 1710; no journal entry in the standard design
- Day 6InspectionThree units resaleable, one scrapped
- Day 6Transfer and scrapThree units to unrestricted stock at $150 each; one unit scrapped
- Day 7Credit for returnsCustomer credited 4 × $210 plus tax; revenue reversed
Finance: the credit side
The credit for returns and the credit memo both post a journal entry that credits the customer's receivable. The debit side goes to revenue or, in many charts of accounts, a separate sales deduction or returns account so that management can see gross sales and returns separately. Output tax is reversed in proportion. Open the journal entry from the billing document's accounting overview or the document flow and check the accounts, the amounts, the profit center and the segment against your expected result.
Advanced Returns Management
SAP S/4HANA also includes Advanced Returns Management (ARM), which SAP describes as part of the always-on functionality. ARM adds structured inspection, refund determination and logistical follow-up: after the goods arrive, an inspector records the result, and that result decides whether the unit goes back to stock, to scrap, to a supplier, or to repair, and how much the customer is refunded. In SAP Best Practices, scope item BKP covers returns with ARM, while BDD covers the simpler returns flow used in this course. If your project uses ARM, the expected results in this lesson still apply, but more of the decisions are made by the system from inspection codes, so those codes need their own test cases.
What would you do?
Priya's tester reports a defect: "Returns goods receipt for 4 CMC-ALT-100 posted, but no accounting document was created." The returns delivery used the standard movement type into blocked stock returns. What should Priya do?
- Return orders and memo requests have no stock or finance effect on their own.
- The standard returns goods receipt posts to non-valuated returns stock, usually with no journal entry.
- Value is added when inspected units move to valuated stock, at the material's valuation price.
- Credits post to the customer and to revenue or a sales deduction account, with tax reversed.
- Advanced Returns Management automates inspection-driven refunds and follow-up; test its codes too.
Check your understanding · not graded
Lesson check
1. Why does the standard returns goods receipt usually create no journal entry?
2. Three good units of CMC-ALT-100 move from returns stock to unrestricted stock in Detroit. What value is added to inventory under standard price?
3. Which accounts does a credit memo typically post to?
4. What does Advanced Returns Management add to the standard returns flow?