USA Compensation by Shipping Company Long after Original Sale

[allen chang]

Hi,

I'm a rookie accountant in our company, and have encountered a small issue.

We use UPS as our shipper and sometimes they lose our package that's supposed to go to our customer. When this happen, we issue a refund to our customer. And at the same time, we make a claim to UPS for the lost package.

What happens next is that UPS sometimes decide to give us a reimbursement for the total worth of the lost package AFTER SEVERAL MONTHS. My question comes in here. How should we adjust this on our accounting book?

I was thinking of making invoice for UPS with exactly same items, and have it as our Accounts Receivable until we receive the check from them.

Could you please confirm me whether this method is the best way and in compliance of US G.A.A.P.?

 

[Fidget]

No, don't invoice them for the items. It'll make it look like you're selling goods to UPS, which you aren't.

I don't how the claim process works, but at the point UPS agrees the reimbursement, it should be getting recorded in your accounts that the money is due in. So you could raise an invoice to UPS for the "reimbursement of goods lost in transit: consignment number: XXXXXX ". That way it's clear that you're not invoicing for the sale of goods.

Depending on how often it happens, you could raise these as they happen, or just raise a single invoice at the end of each month to cover all that have happened in the month.

 

[allen chang]

No, don't invoice them for the items. It'll make it look like you're selling goods to UPS, which you aren't.

I don't how the claim process works, but at the point UPS agrees the reimbursement, it should be getting recorded in your accounts that the money is due in. So you could raise an invoice to UPS for the "reimbursement of goods lost in transit: consignment number: XXXXXX ". That way it's clear that you're not invoicing for the sale of goods.

Depending on how often it happens, you could raise these as they happen, or just raise a single invoice at the end of each month to cover all that have happened in the month.

Thanks for the reply. I think your answer is the best solution for the situation.