Not every return can go back on the shelf. Some arrive worn, broken, or not at all. The right response to those is a write-off, and the mistake is not making one.
The three outcomes of a received return
Restock. The item is fine. Inventory rises by the quantity at the receiving location. This is the default expectation and the most common case.
Write off. The item is damaged, missing, or otherwise unsellable. The unit is gone. It should be recorded as a loss, with a note, so the count does not pretend otherwise.
Resolve. The case was handled some other way, perhaps exchanged, perhaps sold as a second, perhaps returned to a supplier. Recording that closes the question without inflating the count.
Why the write-off matters
A damaged return that is never dispositioned stays open. It looks, in the records, like a unit that might still come back. Six months on, it is a line nobody can explain.
Worse, if the return is marked restocked by habit, the count rises for a unit that is in a bin destined for disposal. That is phantom inventory of the first kind: the admin shows more than the shelf.
What a good write-off record contains
The order, the item, the quantity, the value, the date, and a short note on why. That is enough for a bookkeeper to reconcile at month end, and enough for you to see patterns. If the same style keeps arriving damaged, that is a supplier or packaging conversation, and the notes are where it becomes visible.
In Shopify
When receiving a return, set the disposition to damaged or missing rather than restocked. If the refund was already issued without a return, you can still record the loss, but the important part is not to tick Restock for a unit that will not sell.
Keeping the ledger honest
StockReclaim lists confirmed losses as their own cause, separate from restockable exceptions, and each write-off you record carries its note into the Decisions log and the monthly packet. Nothing is guessed: it reports where the record and the adjustment disagree. See how decisions are recorded.