Scenario 2 — Return to Vendor (Quality Reject)
📊 Business Case — When & Why You Use This
A return to vendor is how a company sends purchased goods back to the supplier — because they're defective, wrong, damaged, or over-delivered — and recovers the money (or avoids paying in the first place). It is the direct reverse of Scenario 1 and an everyday event in any business that receives physical goods.
🕐 When to use it
Goods received fail inspection, arrive damaged, are the wrong item, or exceed what was ordered. You decide to send some/all of it back rather than keep it.
❓ Why it matters
It keeps your inventory accurate (you don't carry stock you rejected) and your payables correct (you don't pay — or you get money back — for goods you didn't keep). It also creates a vendor accountability trail.
👤 Who triggers it
Quality control (QM) rejects a batch → storekeeper/buyer raises the return → AP processes the vendor's credit memo.
🔁 The key decision
Has the vendor invoice already been posted? No → use mvt 122 (Return Delivery). Yes → use a Return PO + mvt 161 + credit memo. That one question picks the method.
💰 Financial Impact — The Easy-Money Example
From the 50 tons received in Scenario 1, 5 tons (₨1,250,000) fail quality inspection — moisture above spec. PakSteel returns them to Mughal Steel. Here's what happens to the money:
Net effect: the company ends up paying only for the 45 good tons (₨11,250,000), never for the 5 rejected. The return either reduces what you'll owe (122) or claws back what you already owed (161). Either path keeps inventory and payables honest.
🇵🇰 The Business Story
RM-IRON-01, plant PK01, storage location RAWM, company code PSPK.
🎯 What you'll learn
- Two return methods and exactly when to use each (122 vs 161)
- How return movements reverse the original FI entries
- Vendor credit memo (doc type
KG) vs invoice (KR) — same MIRO screen, opposite sign - The classic M7 873 "movement 161 not allowed" trap and its fix
📋 Prerequisites
Scenario 1 completed (PO, GR, IV done) so material RM-IRON-01 has stock to return.
Uses RM-IRON-01 (ROH) — created back in Scenario 1 (steps: create RM-IRON-01). Need the steps? how to create a ROH.
- Org structure + MM-FI integration are built — Setup Guide.
- The posting-period and number-range gates are open (this scenario posts goods movements) — Stock-Readiness Checklist.
- Scenario 1 was completed, so
RM-IRON-01has stock to return — Scenario 1. - The vendor (Business Partner) exists — BP Guide.
- The material exists (ROH) — Material Guide.
🔄 Method A — Return Delivery (mvt 122) · invoice NOT yet received
Two routes — pick ONE. Method A is one step; Method B is three.
| Step | T-code | What it does | Why this step exists |
|---|---|---|---|
| Method A — invoice NOT yet posted | |||
| A.1 | MIGO (mvt 122) | Sends the 5 rejected tons back out of stock | Bad goods must not stay on the shelf |
| Method B — invoice ALREADY posted | |||
| B.1 | ME21N | Creates the Return PO — the formal return paper | A paid return needs its own document |
| B.2 | MIGO (mvt 161) | Issues the goods out against the Return PO | Goods must leave with a formal paper trail |
| B.3 | MIRO (KG) | Records the vendor's credit note | You already paid — the vendor owes you back |
A.1 — Return delivery via MIGO movement 122
⚡ This step will: send the 5 rejected tons back OUT of the warehouse — the shelf drops 50 → 45 and the goods-receipt money entry is reversed. 📄 paper: material + accounting document · 📦 stock: ↓ 5 TO at PK01 · 💰 money: Dr GR/IR / Cr Inventory
When: GR done but MIRO not yet posted. You return the goods before the invoice arrives; the vendor reships or simply invoices less.
MIGO has 3 zones — ① the top bar (two dropdowns, Action + Reference, plus the movement type), ② the header tabs (dates, delivery note), ③ the item area (the overview grid + item-detail tabs, e.g. the Where tab for the storage location) with ☑ Item OK at the bottom.
- Run MIGO → Transaction Return Delivery · Reference Material Document · original GR doc # (e.g. 5000000123)
- Movement Type auto-sets to 122
- Reason for Movement:
0001(Quality reject) — mandatory - Quantity
5TO · Storage LocationRAWM→ Post
| G/L | Entry (reverses GR for 5 TO) |
|---|---|
| 300000 Inventory | Cr 1,250,000 |
| 191100 GR/IR | Dr 1,250,000 |
| Timing | Effect | Extra doc? |
|---|---|---|
| Return BEFORE invoice (normal for 122) | Nets against the GR credit still on GR/IR (12.5M Cr − 1.25M Dr = 11.25M Cr) → the later invoice for 45 TO clears it to zero | ❌ None — vendor just invoices 45 |
| Return AFTER invoice | GR credit already consumed by the full invoice → the 1.25M debit dangles open, waiting for the vendor's credit memo | ✅ MIRO credit memo (see Method B step B.3) |
💡 The 122 always posts the same (Inventory Cr / GR-IR Dr). It also reopens 5 TO as "on-order stock" — SAP expects a replacement. If none is coming: ME22N → item → Delivery tab → tick "Delivery Completed" (or reduce PO qty to 45).
🔄 Method B — Return PO + mvt 161 · invoice ALREADY received
B.1 — Create Return PO · ME21N with the Returns flag
⚡ This step will: create the formal return paper — a written record that 5 tons will go back to the vendor. No goods move yet, no money posts yet. 📄 paper: return purchase order · 📦 stock: no change · 💰 money: no posting
When: MIRO already posted; the vendor must issue a credit memo. The Return PO formally documents the reverse transaction.
The ME21N screen has 3 zones — ① the Header (doc type, vendor, Org Data), ② the Item overview grid (one row per line — material, qty, price), ③ the Item detail tabs below. A Return PO is a normal PO plus the Returns Item tick, which lives in the item grid's small R column (also in the item detail).
- Run ME21N — a Return PO is a normal PO + one tick. Header as usual (Doc Type NB, Purch Org PKLO, Group RMT)
- Vendor
MUGHAL21 - Item: Material RM-IRON-01 · Qty 5 TO · Plant PK01 · Net Price stays the ORIGINAL price (it drives the credit value!) · Tax
I0 - ⭐ The one new thing: tick the "Returns Item" checkbox — the small R column in the item grid (scroll right; also in Item Detail)
- Save → Return PO #
B.2 — Goods issue against the Return PO · MIGO movement 161
⚡ This step will: push the goods OUT against the Return PO — stock leaves the shelf and the goods-receipt money entry is reversed, this time with a formal PO trail for the credit memo. 📄 paper: material + accounting document · 📦 stock: ↓ 5 TO at PK01 · 💰 money: Dr GR/IR / Cr Inventory
MIGO has 3 zones — ① the top bar (two dropdowns + the movement type — keep it at 101; the PO's Returns flag derives 161 on the line), ② the header tabs (dates, delivery note), ③ the item area (the overview grid + item-detail tabs, e.g. the Where tab for the storage location) with ☑ Item OK at the bottom.
⚠️ Error "Movement type 161 is not allowed" (M7 873)? → plain cause & fix
- Run /nMIGO (fresh screen) → Transaction Goods Receipt · Reference Purchase Order
- Keep the header movement at
101· PO # = your Return PO → Enter → the item line's Mvt column shows 161 on its own - Header → Delivery Note: e.g.
RET-MS-002(your return challan # — mandatory in many configs, else M7 018) - Item → Where tab → Storage Location
RAWM— a return issues stock, SAP must know from which shelf - Quantity 5 TO · Item OK ✓ · Check → Post
⚠️ "Movement type 161 is not allowed" (M7 873) still appearing after Post? → plain cause & fix
Accounting: same as mvt 122 (Inventory Cr 1,250,000 / GR-IR Dr 1,250,000) — but tied to a Return PO so the credit memo has something formal to reference.
B.3 — Credit memo from vendor · MIRO doc type KG
⚡ This step will: record the vendor's credit note — the open GR/IR debit clears and the vendor now owes YOU ₨1.25M instead of you owing them. 📄 paper: credit memo document (KG) · 📦 stock: no change · 💰 money: Dr Vendor / Cr GR/IR
The MIRO screen has 3 zones — ① the Header tabs (Basic Data · Payment · Details · Tax) — pick Credit Memo here, not Invoice, ② the PO-reference / allocation area (point it at the Return PO), ③ the item list; the Balance top-right must read 0.00 · green before you Post.
- Run MIRO → Transaction Credit Memo (not Invoice) · Doc Type
KG - Reference: vendor credit note # e.g.
CN-MS-2025-001· Amount1,250,000 - PO Reference: the Return PO → Balance 0 → Post
| G/L | Entry |
|---|---|
| 191100 GR/IR | Cr 1,250,000 |
| 160000 Vendor (Trade Payables) | Dr 1,250,000 (reduces what you owe — they owe you back) |
🆚 122 vs 161 — Quick Decision Table
| Method | Use when | Vendor receives | Paperwork |
|---|---|---|---|
| Return Delivery (122) | Invoice NOT yet posted | Adjusted future invoice (for 45) OR reships | Lightest — no return PO needed |
| Return PO + 161 | Invoice ALREADY posted | Issues a Credit Memo (KG) | Formal — Return PO + credit memo trail |
💸 Where does the money come back?
Every ordinary P2P scenario ends with you paying the vendor (an F-53 outgoing payment). A return is the mirror image: after the credit memo, Mughal Steel owes you ₨1,250,000, so no cash leaves your bank for the rejected 5 tons. How that ₨1,250,000 comes back depends on the path:
- Returned before the invoice (Method A, mvt 122): there is nothing to recover — the vendor simply invoices the 45 good tons (₨11,250,000) and you never paid for the reject in the first place.
- Returned after the invoice (Method B, mvt 161 + KG credit memo): the credit memo (B.3) debited Mughal Steel by ₨1,250,000, so the vendor now carries a debit balance — it owes you. Two normal ways to settle it:
- Offset at the next payment run: the ₨1,250,000 credit sits as a negative open item on Mughal Steel. Next time you pay this same vendor with F-53 (or F110), Process Open Items lists the new invoice and this credit together, and the credit is subtracted — you hand over ₨1,250,000 less than the invoice.
- Vendor refunds the cash: if there is no future invoice to net against, Mughal Steel sends the money back and you clear the credit with a bank receipt — the same F-44 / F-58 shown in the Verification table below.
The honest takeaway: a return does not add an outgoing F-53 — it either lowers a future payment or claws cash back. To see a normal money-out payment for comparison, see Scenario 1, Step 5.
✅ Verification — Confirm Scenario 2 Worked
| # | T-code | Check |
|---|---|---|
| 1 | MB51 | Filter movement 122 or 161 → see the return entry |
| 2 | MMBE | RM-IRON-01 stock dropped 50 → 45 TO |
| 3 | FBL1N | Vendor MUGHAL21 → debit balance 1,250,000 (they owe you) |
| 4 | F-44 / F-58 | Clear the credit (vendor refunds bank, or offset next invoice) |
🎓 Interview-Ready Answers
Q: How do you return goods to a vendor in SAP, and what decides the method?
Two ways. If the invoice isn't posted yet, a Return Delivery with movement 122 (against the original material doc, reason for movement mandatory) — the vendor just invoices the reduced quantity. If the invoice is already posted, create a Return PO (Returns Item flag), do goods issue (the flag derives movement 161), then post a credit memo (MIRO doc type KG) so the vendor's liability is reduced. The deciding question is simply: has the invoice been posted?
Q: Why do you get "Movement type 161 is not allowed" and how do you fix it?
Because you typed 161 into the MIGO header movement field. You should keep it at 101 — the Returns Item flag on the PO derives 161 automatically on the line. If it still fails, confirm the R flag saved on the PO (ME23N) and that OMJJ lists MIGO as an allowed transaction for movement 161.
Q: What's the accounting impact of a return?
It reverses the goods receipt for the returned quantity: Inventory credit, GR/IR debit. If done before the invoice, the GR/IR nets against the original GR credit and the vendor invoices less. If done after, the dangling GR/IR debit is cleared by a vendor credit memo, which also debits (reduces) the payable.