When managing exchanges through yayloh, it’s crucial to ensure accurate bookkeeping to maintain financial integrity. Exchange orders can either be processed with a 100% discount or marked as paid in Shopify. However, yayloh does not modify the original order; instead, a new exchange order is created, often with a tag and prefix for easy identification.
Standard refund (no store credit or exchange)
Before we understand the adjustments required for exchanges, it is important to understand how refunds work in Shopify and why exchanges are necessary. For standard refunds, Shopify automatically makes positive adjustments when payments are refunded, and items are restocked.
Example:
A product costs SEK 100.0, with SEK 20.0 in sales tax, making the total order SEK 120.0. When refunded:
The customer is refunded SEK 120.0.
The product and tax values are returned to the original order (-100.0 SEK and -20.0 SEK).
A corresponding “Yayloh refund” adjustment of -120.0 SEK is applied.
Shopify then applies a positive adjustment of SEK 120.0 to balance records.
| Gross Sales | Discounts | Returns | Net Sales | Taxes | Total Sales |
Original order | 100.0 | 0.0 | 0.0 | 100.0 | 20.0 | 120.0 |
Product Marked returned | 0.0 | 0.0 | -100.0 | -100.0 | -20.0 | -120.0 |
yayloh refund | 0.0 | 0.0 | -120.0 | -120.0 | 0.0 | -120.0 |
Shopify positive adjustment | 0.0 | 0.0 | 120.0 | 120.0 | 0.0 | 120.0 |
Total first order | 100.0 | 0.0 | -100.0 | 0.0 | 0.0 | 0.0
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Understanding Exchange Accounting Options
When a customer makes a purchase through your website, the rules defined in your Shopify admin apply, and taxes or duties are calculated accordingly. Below is an example of how this appears in the original order.
However, in case of exchanges since the order is created via yayloh i.e. shopify API. The order payment details are updated differently. When a customer exchanges an item, there are two primary ways to account for it in Shopify:
Mark as Paid: The order is simply marked paid.
100% Discount: The exchange order is created with a 100% discount.
Exchange Accounting Process for orders with 100% Discount
This method applies when the exchange order is fully discounted, meaning no additional payment is collected.
Benefits:
Suitable for merchants tracking sales and tax externally.
Limitations:
May inflate discount values, affecting metrics like Average Order Value in Shopify reports.
Example:
Original Order: Remains unchanged, and revenue is recorded from the initial transaction.
Exchange Order: Created with a 100% discount, meaning net sales value is 0.
Adjustment Phase:
Discounts: +20.00 (Reversing the applied discount)
Taxes: -20.00 (Adjusting for declared VAT on the exchanged item)
| Item | Gross Sales | Discounts | Returns | Net Sales | Taxes | Total Sales |
1 | Original Order | 100.0 | 0.0 | 0.0 | 100.0 | 20.0 | 120.0 |
2 | Exchange Order (100% Discount) | 100.0 | -120.0 | 0.0 | -20.0 | 20.0 | 0.0 |
3 | Total (First + Second) | 200.0 | -120.0 | 0.0 | 80.0 | 40.0 | 120.0 |
4 | Adjustment | 0.0 | 20.0 | 0.0 | 0.0 | -20.0 | 0.0 |
| Final Total | 200.0 | -100.0 | 0.0 | 100.0 | 20.0 | 120.0 |
Exchange Accounting Process for orders with Marked as Paid
This method applies when the replacement item is marked as paid in Shopify, meaning it is treated as a new sale.
Benefits:
Works well for merchants using Shopify as the primary financial source.
Ensures seamless data flow into third-party systems.
Limitations:
Shopify requires manual adjustments to prevent inflated net sales figures.
Example:
Original Order: Remains unchanged.
Exchange Order (Marked as Paid): Recorded as a new sale of $120.00, increasing total sales.
Adjustment Phase:
Correction: Apply a -$120.00 adjustment to prevent revenue overstatement.
| Item | Gross Sales | Discounts | Returns | Net Sales | Taxes | Total Sales |
1 | Original Order | 100.0 | 0.0 | 0.0 | 100.0 | 20.0 | 120.0 |
2 | Exchange Order (Marked as Paid) | 120.0 | 0.0 | 0.0 | 120.0 | 0.0 | 120.0 |
3 | Total (First + Second) | 220.0 | 0.0 | 0.0 | 220.0 | 20.0 | 240.0 |
4 | Adjustment | -120.0 | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Final Total | 100.0 | 0.0 | 0.0 | 100.0 | 20.0 | 120.0 |
Conclusion
By understanding and applying these accounting adjustments, merchants can ensure that exchange orders are correctly reflected in financial records, avoiding overstated sales or incorrect tax reporting. Whether using 100% discounts or marking exchanges as paid, proper bookkeeping practices help maintain accuracy and efficiency.