Treatment of Accounts- WHEN THE BUSINESS SENDS GOODS CASUALLY ON SALES OR RETURN
WHEN THE BUSINESS SENDS GOODS CASUALLY ON SALES OR RETURN
When the transactions are few, the seller
on sending the goods, treats them as an ordinary sale. If the goods are
accepted or not returned or the business receives no intimation within the specified
time limit, no extra entry is required to be passed because the transaction for
sale or return becomes entry after the expiry of the specified period. If the
goods are returned within a specified time limit, a reverse entry is passed to
cancel the previous transaction. If, at
the year-end, goods are still lying with the customers and the specified
time limit is yet to expire, the entry for sales made earlier is cancelled and
the value of the goods lying with the customers must be reduced from the selling
price to the cost price, and treated as an ordinary stock for Balance Sheet
1. When goods are sent on approval or on sale or return basis
Sundry Debtors Account Dr. [Invoice price]
To Sales Account
2. When goods are rejected or returned within the specified time
Sales/Return Inwards Account Dr. [Invoice price]
To Customers/Sundry Debtors Account
3 When goods are accepted at invoice price--- [No entry]
4 When goods are accepted at a higher price than invoice price
Sundry Debtors Account Dr.
To Sales Account [Difference in price]
5 When goods are accepted at a lower price than the invoice price
Sales Account Dr.
To Sundry Debtors Account [Difference in price]
6 (i) At the year-end, when goods are lying with customers and the specified time limit is yet to expire
Sales Account Dr. [Invoice price]
To Sundry Debtors Account
(ii) These goods should be considered as stock with customers and in addition to the above, the following adjustment entry is to be passed
Stock with Customers on Sale or Return Account Dr.
To Trading Account [Cost price or market price whichever is less]
No entry is to be passed for goods returned by the customers on a subsequent date.
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