Sales returns and allowances represent the reductions in sales revenue due to returned goods or allowances granted to customers. These transactions need to be recorded to accurately reflect the reduction in revenue and any changes in accounts receivable or cash.
Here are the main journal entries for sales returns and allowances:
1. Sales Returns
When a customer returns goods, the sales return needs to be recorded. Assume a customer returns goods worth ₹10,000 that were originally sold on credit.
| Date | Particulars | Debit (₹) | Credit (₹) |
|---|---|---|---|
| 2024-06-30 | Sales Returns and Allowances A/c | 10,000 | |
| To Accounts Receivable A/c | 10,000 | ||
| (Being goods returned by customer) | |||
2. Sales Allowances
When a sales allowance is granted, such as a discount due to a product defect, the allowance needs to be recorded. Assume an allowance of ₹5,000 is granted to a customer.
| Date | Particulars | Debit (₹) | Credit (₹) |
|---|---|---|---|
| 2024-06-30 | Sales Returns and Allowances A/c | 5,000 | |
| To Accounts Receivable A/c | 5,000 | ||
| (Being allowance granted to customer) | |||
| - |
Explanation:
- Sales Returns and Allowances A/c: This account is debited to record the reduction in sales revenue due to returns or allowances.
- Accounts Receivable A/c: This account is credited to reduce the amount owed by the customer.
Example Breakdown:
1. Sales Returns
A customer returns goods worth ₹10,000 that were sold on credit.
| Date | Particulars | Debit (₹) | Credit (₹) |
|---|---|---|---|
| 2024-06-30 | Sales Returns and Allowances A/c | 10,000 | |
| To Accounts Receivable A/c | 10,000 | ||
| (Being goods returned by customer) | |||
2. Sales Allowances
A customer is granted an allowance of ₹5,000 due to a defect in the product.
| Date | Particulars | Debit (₹) | Credit (₹) |
|---|---|---|---|
| 2024-06-30 | Sales Returns and Allowances A/c | 5,000 | |
| To Accounts Receivable A/c | 5,000 | ||
| (Being allowance granted to customer) | |||
These entries ensure that the sales returns and allowances are accurately reflected in the financial statements, providing a clear picture of the actual sales revenue and the amounts owed by customers.
