I have an inventory item, XYZ, that when I sell I often receive back a trade in shortly after. Once I have received back the trade I send it to a vendor who determines if the item can be refurbished. If the item can be refurbished I then may or may not refund (case by case basis) the agreed upon value for the trade in. Once I receive the item back from my vendor I then place it into inventory as Refurb XYZ. If the item can not be refurbished it is binned.
So my question is should I create a non inventory item called XYZ Trade In and set the expense account to sales discount. Use that new item to issue credit memo to customer and when I receive back the Refurb XYZ I just inventory it with a cost reflecting the refurbishment? But I need to now apply the cost of the credit that was issued to the customer to that particular Refurb XYZ so that the cost is sitting in the correct place. Meaning, I would need to somehow debit sales discount and increase the cost of that particular Refurb XYZ by the trade in value? In the event the XYZ Trade In I would follow the same process, debit sales discount, XYZ Trade In, increase/credit cost to the original sale of the XYZ?
