RETURNS INWARDS AND RETURNS

OUTWARDS JOURNAL
Returns inwards (sales returns)
and returns outwards (purchase
returns)
When goods are bought and sold it is inevitable that occasionally they are not
suitable to the buyer for various reasons, such as when the goods were:
• faulty or damaged
• not suitable for the particular requirement, that is, wrong type, size, colour,
etc.
• the consignment was incomplete
• there was an overcharge on the invoice.
• When this happens, the supplier will need to make an allowance
to the customer to correct the situation
 RETURNS JOURNALS AND CREDIT NOTES

• If the goods supplied are unsuitable then the supplier

will need to rectify the situation. Since the customer (debtor) will have
already been sent an invoice at the time the goods were delivered they will
be in debt to the supplier (creditor) for the value of the goods.

Therefore, when the supplier makes an allowance for goods that have been
returned, or a reduction in price has been agreed, the supplier will issue a
credit note to the customer (debtor) showing the amount of the agreed
reduction.
RETURNS INWARDS/SALES RETURNS

• Returns inwards (sales returns) and credit notes As mentioned above, if

the goods supplied are unsuitable then the supplier will need to rectify
the situation.
• Since the customer (debtor) will have already been sent an invoice at
the time the goods were delivered they will be in debt to the supplier
(creditor) for the value of the goods. Therefore, when the supplier
makes an allowance for goods that have been returned, or a reduction in
price has been agreed, the supplier will issue a credit note to the
customer (debtor) showing the amount of the agreed reduction.
CREDIT NOTE AND SALES RETURNS
RETURNS INWARDS DAY BOOK FORMAT

RETURNS INWARDS DAY BOOK

Date Details Credit note Folio Amount $

Year number
Dt
 Preparing a Returns inwards/ Sales returns
day book
SALES RETURNS BOOK Page 2

Date Supplier Credit note Folio Amount

number $

Jan 9 Garcia Ltd 103 SL 1 23

Jan 23 Rampersad & Co. 104 SL 2 119

Total sales returns
GL 25 142
 PRACTICE QUESTIONS

• Recording returns inwards

• Alicia owns a business supplying car accessories to local garages
and car dealers. During June 2018,credit customers returned goods
that had been sold to them on credit:

June 11 Credit note 454 Goods returned by Parsed Garages Ltd with a value of $220

June 13 Credit note 455 Goods returned by Beretta Car Dealers with a value of $507

June 24 Credit note 456 Goods returned by Parsed Garages Ltd. These goods had been
invoiced at $1500 less a trade discount of 33 1/3 %
Practice question 2

• Shaundel owns a business supplying designer clothes to retailers in

the region. During October 2020,credit customers returned goods
that had been sold to them on credit:

Oct 9 Credit note 756 Goods returned by Castries Designwear with a value of $474

Oct 20 Credit note 757 Goods returned by Garcia Ltd with a value of $232

Oct 23 Credit note 758 Goods returned by Garcia Ltd. These goods had been invoiced at
$1640 less a trade discount of 15%
RETURNS OUTWARDS DAY BOOK

• It is not unusual for a business to return goods to suppliers that have

previously been purchased on credit. This happens when some items
in a delivery are:
Damaged or broken
Not as ordered ( wrong model, wrong size, wrong colour,etc,)
Received too late (‘sell by’ date exceeded).
CREDIT NOTE EXAMPLE

CREDIT NOTE No.623

McKoy Wholesale Ltd
To: Davika Retail Stores
Date: 18 August 2021
Quantity Description Unit Price Total
$ $
12 boxes Detergent 183.60
Less 20% trade discount 36.72
NET 146.88
PURCHASES RETURNS DAY BOOK

• The book of original entry used to list all credit notes received
from suppliers is called the purchases returns or returns outwards
day book.
EXAMPLES RETURNS OUTWARDS DAY BOOK

RETURNS OUTWARDS DAY BOOK Page 2

Date Supplier Credit note Folio Amount

number

Sept 14 Bennett & Co. 347 PL1 112

Sept 27 Mungroo Ltd 1279 PL2 273

Total purchases returns GL18 385

Alternative document for Returns outwards

• Sometimes a document called a debit note is used as evidence for a

purchase return.
• The process is as follows:
• The customer receives a consignment of goods and an invoice
• The customer notices some damaged/unwanted items to the supplier and,
at the same time,the customer prepares a debit note listing the items
being returned and the amounts that should be deducted from the invoice
sent with the whole consignment.
• The debit note is used to make the appropriate entry in the returns
outwards book.
Practice questions

• Recording purchases returns

• Ronaldo owns a shop supplying fishin tackle. During March 2021,he
returned goods to suppliers that had previously been purchased on
credit and received the following credit notes:
March 11 Credit note 242 Goods returned to Scott Ltd with a value
March 18 Credit note 375 Goods returned to Taylor & sons Ltd with a value
March 29 Credit note 247 Goods returned to Scott Ltd. These goods had been invoiced at
$550 less a trade discount of 20%
Practice questions 2

• Denial owns a shop selling household goods. During July,2021, she

returned goods to suppliers that had previously been purchased on
credit and received the following credit notes.
July 4 Credit note 331 Goods returned to Segicore Ltd with a value of $297
July 15 Credit note 829 Goods returned to Segicore Ltd with a value of $115
July 26 Credit note 337 Goods returned to Segicore Ltd. These goods had been
invoiced at $840 less a trade discount of 25%