Sales Return Journal
Sales may be returned by the customer due to defective quality, error, oversupply etc. In order to record these returns, we may use ” Sales Returns Journal.”
In the case of sales return, ” Credit Note” is usually sent to the customer stating that his account has been duly credited. Credit Note is often printed in ” Red ink” to distinguish them from the invoice. The Customer who returns goods may send a ” Debit Note” with the goods return. On the basis of acceptance of the goods returned by the customer, the credit note is prepared.
Sales return journal to be made in the Customer A/c and Sales Return A/c. Customer Account will be credited and sales return account will be debited. Sales Return Account also known as ” return inward Account.”
Accounting Treatment of “Sales Return”:
Sales return account is the contra account to ” Sales A/c.” Sales are reversed by debiting the sales return account by the amount of original sales and crediting accounts receivable account or cash account (depending on whether it was a credit sale or a cash sale).
Journal Entries:
| Sales Return A/c | Debit |
| Accounts Receivable A/c | Credit |
* Company may not use the contra -account for the purpose of sales return. In this respect the company may debit the – Sales Account directly and credit ” Receivable, or Cash A/c.” The journal entry in this respect is:
| Sales A/c | Debit |
| Accounts Receivable/Cash A/c | Credit |
* When a product is Physically returned, it will increases inventory and decreases the related cost of goods sold recognized at the time of sale.
The journal entry in this respect is:
| Inventory A/c | Debit |
| Cost of Goods Sold A/c | Credit |
Purchase Return Journal
Purchased goods may be returned due to defective quality, error, oversupply etc. In order to record these returns, we may use ” Purchase Returns Journal.”
In the case of purchase return, “Debit Note” is usually sent to the seller requesting him to credit his account mentioned in the debit note. After receiving the goods and Debit Note the seller issue a Credit Note stating that his account (Purchaser’s A/c) as mentioned in the Debit note has been credited.
Purchase return also known as ” Return Outwards Account.”
Accounting Treatment of Purchase Return:
Initial Journal Entry for Purchase Return:
| Trade Payable A/c | Debit |
| Purchase Return A/c | Credit |
* Company may not use the contra -account for the purpose of purchase return. In this respect the company may debit the – Trade Payable Account directly and credit ” Purchase, or Cash A/c.” The journal entry in this respect is:
| Trade Payable A/c | Debit |
| Purchase/Cash A/c | Credit |