A Sales Return occurs when a customer sends goods back to the seller. Therefore, it is essential to record all the transactions related to sales and sale returns taking place per day or an accounting period to be up to date.
Here are some common reasons why a customer needs to return goods:
If the company sent the wrong quantity of the goods, more or less than the customer bought, in this case, the buyer might return the goods to the seller.
In the case of arriving goods damaged during the manufacturing or shipping process, the buyer returns the goods to the seller for replacement.
If the buyer needed goods for a specific date and delivery was late, the buyer might return the goods.
It is also common for customers to buy goods online and discover that they have yet to match expectations after delivery.
A sales Journal, also known as Sales Book, is an original entry needed to record the goods' credit sales. The sales paid by cash are recorded in the cash books, and credit sales of any other asset, except goods, are recorded in the journal proper.
The invoice sent to the customers is the leading legal source for the financial entry.
A sales return journal, also known as Return Inwards Journal, is the original book of entries where transactions referring to the return of goods are recorded.
Returns of goods to companies are recorded. It happens by issuing a credit note in favour of the buyer, which indicates accounts have received the credit.
Important Note: The return of goods made by cash is not recorded in the Sales return journal.
A purchase return occurs when the buyer sends goods back to the seller. A business should closely monitor purchase returns because excessive returns can negatively impact profitability.
Here are several common reasons for purchase returns for you:
The supplier should issue a Credit Note to the buyer to deal with these cases.
A purchase book or journal records all credit purchases made. Purchases of cash goods are recorded in the cash book. In a purchase book, only goods are recorded, not assets purchased. An asset purchase entry is recorded in the journal proper.
Information in the Purchase book is gathered from documents such as invoices or bills received from suppliers. Trade discounts and other details on the invoice are not included in the purchase book entries.
Purchase return books or purchase returns day books record transactions involving goods purchased on credit that are returned to the supplier. Buyers sometimes return goods because of defects or low quality.
Important note: Purchasing returns are deducted from the Purchase book via a separate subsidiary book. Purchase returns are entered for the invoice's net amount.
A debit note in duplicate is prepared for every return of goods. The organization keeps a duplicate copy of the Debit Note for its records and sends the original to the supplier. The Debit Note consists of the date, serial number, name of the supplier, details and reasons for the return of the goods.
Furthermore, suppliers can issue a Credit Note to the buyer once they receive the goods.
The difference between a purchase return book and a purchase book is that a purchase book is needed to record all credit purchases done by a company. In contrast, a purchase return book is required to record goods returned to suppliers.
The main difference between a Sales Return and a Purchase Return is that a Purchase Return is needed for recording those goods purchased from the supplier. These items are sent back to the supplier. In contrast, a Sales Return is used for the goods a customer returns to the business.