Goods/Stock purchased or sold being returned is quite a common practice in business. This may be on account of a number of reasons like defects in goods, quality not matching the requirement for which the buyer purchased it, the buyer not needing the stock, etc. This happens both in case of goods purchased as well as goods sold by the organisation. Where the goods sold are being returned we call it "Sales Returns" and where goods purchased are being returned we call it "Purchase Returns" The transactions of return of goods are also accounting transactions and have to be recorded in the books of accounts just like any other accounting transaction. oPurchase Returns
Considering a transaction of credit purchases, the two elements effected would be the Purchases a/c and the Vendor a/c. Purchase of stock, being an expenditure, the Purchases a/c is debited and the Vendor being the benefit giver the Vendor a/c is credited. Therefore in recording a transaction of Purchase Returns, the Vendor a/c is debited and the Purchases a/c is credited. o Sales Returns
Considering a transaction of credit sales, the two elements effected would be the Sales a/c and the Buyer a/c. Sale of stock, being an income, the Sales a/c is credited and the Buyer being the benefit receiver the Buyer a/c is debited. Therefore in recording a transaction of Sales Return, the Buyer a/c is credited and the Sales a/c is debited. 3 GOLDEN RULES OF ACCOUNTANCY
(1) Debit What comes in & credit what goes out [Real Account] Real Accounts - All tangible assets like cash, car, furniture and intangible assets like goodwill, patents (2) Debit the Receiver & Credit the giver [Personal Account] Personal Accounts - Jose, cyndie or any other person or any company's account in business
(3) Debit all the Expenses and losses & Credit all the Incomes and gains. [Nominal Account] Nominal Accounts - All Income, Expenses, Profit, Losses Accounts
Note:- (1) Debit if there is a decrease in liability and...
Please join StudyMode to read the full document