Accounting for Sales Return
In this lesson, we will learn how to calculate sales return with trade discount, record them in the journal and ledger accounts, and to close the sales return account.
Related Lessons:
Calculating Sales Return
Sales return are goods previously bought by customers and returned to the business.
If a trade discount is given to the original sales, the same percentage of trade discount is deducted from the list price of the goods returned. This gives us the amount of net sales return to be recorded in our accounts.
Recording Sales Return
Sales return is recorded in the journal as follows:
1. To record return made by credit customers
Dr Sales return
Cr Trade receivables
2. To record return that was refunded by cash
Dr Sales return
Cr Cash in hand
3. To record return that was refunded via the bank
Dr Sales return
Cr Cash at bank
Closing Sales Return Account
To close the sales return account, at the end of the month, the balances in the sales return account are transferred to the income summary account, and we start the following month afresh.
Dr Income summary
Cr Sales return