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Include Refunds as Returns (Using Refunds to Calculate Negative COGS)

This article covers what the "Include refunds as returns" COGS setting is for, how it works, and how to set it up.

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Written by Norrie Sheng
Updated over a week ago

🎉 This feature is currently in beta for: Ebay, Etsy, and Walmart.

Amazon and Shopify coming soon

What it does

With this setting enabled, refunds associated with a SKU are considered as returns and will be calculated as negative COGS with inventory being restocked.

This replaces the manual process of posting adjustments for returned items. And if refunds don't always represent returns for your business or if products aren't typically restocked, it may still make sense to use this feature to map refunds to an inventory loss account.

These additional lines for refunds will be included in new (or refreshed) COGS postings once the setting has been enabled.

How it works

  • A2X uses the current costs table to calculate COGS for refunds.

  • Refund COGS are posted based on refund date.

  • Refund COGS are grouped separately in COGS postings and in COGS exports.

  • These additional lines for refunds will be included in new (or refreshed) COGS postings once the setting has been enabled.

Simplified explanation of entries

Cost of Goods Sold (Sales)

Debit

Inventory Deduction (Sales)

Credit

Cost of Goods Sold (Refunds)

Credit

Inventory Restock (Refunds)

Debit

Enabling & configuring the setting

  1. Go to Settings → Cost of Goods Sold.

  2. Enable Cost of Goods Sold.

  3. Check Include refunds as returns.

  4. Map accounts for Refunded COGS and Inventory asset.

⚙️ Grouping Settings (e.g., Sales by Product Type)

Refunds COGS and Inventory lines will be split according to grouping settings, same as COGS for sales.
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Support for Xero Tracked Inventory is coming soon.

Review and post

  • On the posting review page, refunded SKUs appear in their own table.

  • Post as usual.

  • Manual exports (General Journal CSV, NetSuite CSV, Sage CSV, IIF) include a distinct refunds section.

FAQ

Does this restock physical inventory?

No. This is accounting only.

Can I switch it off later?

Yes. Turn the checkbox off, then refresh affected settlements before posting.

Do partial refunds reverse COGS?

Only when the refund includes itemized SKU and quantity. Non‑itemized partials do not change COGS.

Will this change my historical posted invoices?

No. Existing postings are not affected unless refreshed.

How are exchanges or goodwill refunds without item quantity handled?

No inventory move is posted; COGS reversal requires itemized SKU and quantity.

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