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Sales Return Book: Meaning, Format, and Example

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When the business is small, it is easy to record every transaction in a single book called ‘Journal’. Journal is also known as the book of original entry. But gradually when the business expands, it becomes inconvenient to record such a large number of transactions in a single book. So, the book of original entry or Journal is further divided into different special journals called ‘Subsidiary Books’. Firstly, all the transactions are recorded in the relevant subsidiary books and afterwards posted to the ledger accounts. For example, Cash Book is prepared to record all the cash transactions, Sales Book is prepared to record all the credit sales, and so on. Sales return book is also an important subsidiary book to look upon.

What is a Sales Return Book?

A ‘Sales Return Book’ is maintained to record the goods returned by customers to whom sales were made on a credit basis. 

The following items are not recorded in the Sales Return Book:

(1) Return of goods initially sold for cash because such transactions are recorded in the Cash Book; and 

(2) Return of items other than the goods

At the time when goods are received back by the supplier, in addition to the returned products, a credit note is also generated. A ‘credit note’ includes the party’s name from whom the goods are received back, the particulars of the returned products, and also the reasons for which the goods have been received.

What is a Credit Note?

A credit note can be issued when a sales invoice is mistakenly overcharged or when a special discount is given to the customer due to defective goods.

Important Points about a Credit Note:

  • The Credit Note serves as the source document for entries in the Sales Return Book.
  • Each credit note has a unique serial number.
  • It also contains the correct date. 
  • It is called a credit note because the amount written on it is credited to the customer’s account.
  • Also, for every credit note, a duplicate copy is created in case it might be useful in the future. 
  • The duplicate copy is kept to record the entries in the books and the original copy is sent to the customer.
  • The credit note is referred to as a debit note by the customers who return back the goods.

Sales Return Book is also known as ‘Return Inward Book’ or ‘Sales Return Journal’. Sometimes, trade discount is also provided to the customers on credit sales. So, if a trade discount was allowed when the sales were made, then it is deducted while recording the value of goods returned in the Sales Return Book.

Format of Sales Return Book:

The basic structure or the format of the sales return book is identical to that of the format of the purchase return book except for the debit note number, which is replaced by the credit note number. The format of the sales return book is presented below:

 

Following is the explanation of the columns of the Sales Return Book:

1. Date: The date on which the return of goods on credit sales has been placed is mentioned in this column.

2. Particulars: This column consist the details like the name of the party by whom the return has been placed, a complete description of the goods returned, the exact quantity being returned, the unit price of the good, percentage of trade discount.

3. Credit Note No.: It records the number of the credit note using which the transaction in the sales return book has been recorded.

4. L.F.: L.F. stands for Ledger Folio. It records the page number of the ledger where the transaction has been posted.

5. Details:  This column represents the gross amount of the goods returned. In case there is any trade discount, it is deducted from the gross amount.

6. Sales Return: This column represents the net amount of the goods returned adjusted with the amount of trade discount.

7. Output CGST: CGST is chargeable on the goods, which are exchanged within the state meaning, thereby, the seller, and the buyer belong to the same state. CGST is calculated on the net sales return value already adjusted with the trade discount. This amount is shown in this column.

8. Output SGST: SGST is again chargeable on the goods which are exchanged within the state meaning, thereby, the seller and the buyer belong to the same state. Like CGST, SGST is also calculated on the net sales return value already adjusted with the trade discount, and this amount is shown in this column.

9. Output IGST: IGST is chargeable on the goods which are bought from outside the state meaning, thereby, the seller and the buyer does not belong to the same state. IGST is calculated on the net sales return value already adjusted with the trade discount. The amount for IGST is mentioned in this column.

10. Total Amount: It consists of the total amount, which finally arrives after including the balances of every column.

Ledger Posting of Sales Return Book

Before posting transactions from the Sales Return Book to the ledger, it is important to keep the following points in mind:

1. Entries posted to Customers’ Personal Accounts: 

Firstly, the names of customers who have returned goods are recorded in the Sales Return Book. Then, the total value of goods returned is credited to the customer’s account. The total value of goods returned includes the value of goods returned plus GST chargeable at the time of sale.

2. Entries posted in Sales Return Book:

The final amount showing in the total amount column according to the format is debited to the Sales Return Account in the ledger. The entry is recorded in the debit side of the ledger account as – ‘To Sundries as per Sales Return Book’.

3. Entries posted in GST accounts:

The amount of GST chargeable at the time of sale is debited from the output IGST, output CGST, and output SGST accounts. Usually, the percentage for CGST, SGST, and IGST is 6%, 6%, and 12%, respectively.

Illustration:

Prepare the Sales Return book for Ms. Gauri, who runs an enterprise in Gujarat. Following are some of the transactions which took place in the month of December 2021. Assume CGST @6% and SGST @6%, and IGST @12%.

Year

Particulars

December 6 (Credit Note No. 150) Allowance allowed to Ramesh & Co., Jaipur (Rajasthan) for the mistake in the invoice for ₹500
December 12 (Credit Note No. 157) Goods returned back by Jayant & Sons, Surat (Gujarat) worth ₹5000 at a trade discount of 10%
December 23 (Credit Note No. 163) Goods worth ₹3500 were returned by Gopal & Sons, Ahmedabad (Gujarat) for the reason that these were defective

Solution:

Sales Return Book

 


Last Updated : 16 Mar, 2023
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