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Returns Inwards

Returns inwards or sales returns are goods that are sold on credit and returned to the seller by the customers for various reasons such as:

  • the goods are of a different type, colour, size or model;
  • they may be shoddy goods or of poor workmanship;
  • the goods are damaged in transit.

A credit note is issued to the customer who returns goods to the company. This is an appropriately named note as the customer’s account is credited to reduce his debit balance which is the debt owed to the supplier of the goods. The credit note is the source document used for recording in the books.

When goods purchased on credit are returned by the customer, no recording is made in the sales journal. The sales journal records only credit sales, and not sales returns. Sales returns or returns inwards are entered on the debit side of the returns inwards account. This returns inwards account has to be debited as the goods returned increases the stock account balance which is a debit balance.

For postings to ledgers, see returns inwards book/journal

Last Updated (Wednesday, 20 October 2010 16:48)