Processing Credit for Damaged Model from Vendor (Vendor Charge Back / Damage Allowance)

EPASS Support

06-Mar-2026

When a manufacturer provides a damage allowance for a damaged unit (serial), the company processes it as a Vendor Charge Back (VCB).

Instead of recording the vendor credit immediately, the process begins by creating an invoice using the Vendor Charge Back invoice type. This allows you to attach supporting documentation and add notes in the invoice notepad detailing what each manufacturer representative has approved.

The invoice remains open until the credit or payment is received from the vendor. Once the vendor issues a credit memo or payment, Finish the invoice as normal and create a negative AP invoice to reduce the vendor payable balance.

Setup Requirements

1. Create Invoice Type

Create a new Invoice Type for Vendor Charge Backs.

Navigation:
Tools > System Maintenance > Tables > Invoice Type

Steps:

1. Click Add.
2. Enter the following:
   • Code: VCB
   • Description: Vendor Charge Backs
3. Click OK to save.

This invoice type will be used whenever the company needs to bill a vendor for damage allowances.
 

2. Create Miscellaneous Codes

Create the following Miscellaneous Codes to ensure the correct GL accounts are used when processing vendor charge backs.

Navigation:
Tools > System Maintenance > Tables > Miscellaneous

Steps:

1. Click Add.
2. Create the misc codes listed below.

• Code: VCB-SS     Description: Vendor Charge Back for Serial Sold

• Purpose: Used when the damaged unit has already been sold.
• GL Account: Cost of Goods Sold (COGS)
• Click OK

• Code: VCB-SIN      Description: Vendor Charge Back for Serial in Inventory

• Purpose: Used when the damaged unit is still in inventory.
• GL Account: Inventory Asset Account
• Click OK

These misc codes ensure the correct accounting treatment depending on whether the damaged serial has been sold or remains in inventory.

Processing Vendor Charge Backs (VCB)

Step 1: Create the Vendor Charge Back Invoice

1. Go to Invoicing Maintenance.
2. Click Add to create a new invoice.
3. Change the Invoice Type to VCB – Vendor Charge Backs.
4. In the Invoice Detail, select the appropriate Misc Code based on the serial status.
5. Click Exit to save the detail line.

Step 2: Serial - Add notes & update the cost on Serial

1. Use Scan Serial to pull up the serial number.
2. Click Depreciation & Adjustment.
3. Enter the damage allowance amount provided by the vendor.
4. Add detailed notes describing the damage and the vendor agreement or approval.

Step 3: Finish the Invoice

Navigation:
Invoice Maintenance > Search Invoice

1. Locate the invoice.
2. Click F (Finish) on the toolbar.
3. Post the invoice as normal.

Processing Vendor Payment or Credit

Once the vendor provides reimbursement (credit memo or payment).This process will clear the AR balance from the vendor charge back invoice and reduce the AP payable balance for the vendor, complete the accounting entries as follows:

Step 1: Perform an AR Adjustment

Apply an AR Adjustment against the Vendor Charge Back invoice.

Navigation:
AR > Add Transactions > Adjustment

Steps:

• Select the Customer.
• Enter the Invoice Number for the vendor charge back invoice.
• Enter the Adjustment Amount.
• Use the AR/AP Clearing Account as the GL account.
• Add relevant notes.
• Click OK to save.

Step 2: Create a Negative AP Invoice

Create a negative AP invoice to offset the vendor payable.

Navigation:
AP > Add Transaction > Invoice

Steps:

• Select the Supplier.
• Enter the Amount as a negative value.
• Enter the Invoice Number (credit memo or reference).
• In the Distribution, select the AR/AP Clearing Account.
• Click OK to save.