Customer refund / leftover 2019 vendor credit -- how to enter on Schedule C?

[westvillagedrape]

Working on Schedule C "Returns and Allowances" -- customer returned some equipment, which we refunded in full.  Manufacturer gave us credit instead of a refund for our cost.  It's 2020, and we still haven't used up the credit.

How do we document all of this on Schedule C?

Thank you!

Dede O'Hair

[RobertG · Accepted solution]

Claim the amount refunded in full as returns and allowances, if you included the sale as part of gross receipts.  

Include the credit in ending inventory.

[westvillagedrape]

That makes sense... thanks!