Return inwards vs return outwards journal

In this article, we compare and contrast between return inwards and return outwards journal. In all, the main differences between them are their source documents and the ledgers to which their entry is posted. Also, they are similar in that both are referred to as books of original entry.

Similarity between return inwards and return outwards journals

1.1 Books of original entry

Both return inwards and outwards are categorized as books of original entry. This day book is used to record returned items temporarily before posting them to their ledger accounts. 

1.2 Evidence of transaction

They use similar evidence for the return item transactions. This includes debit and credit notes. These source documents must be provided as evidence before they are recorded to the returned journals.

1.3 Mostly used by large entities

Generally, it is large entities with several individuals handling different tasks that use the return day books. This is to ensure proper control of the company resources.

1.4 For return of goods

The return inwards and return outward books are primarily used for the return of goods to and out of the organization. Cash refund does not go into this journal. 

2. Four Differences between return inwards and return outwards day book

Now let's consider four differences between these two specific journals.

2.1 Evidence required

The evidence used for the sales return day book is the debit note issued and credit note received and that used for the purchases return book is the debit note received or credit note issued.

2.2 How it is used

The return inward book is used when goods are returned by customers/clients to the business. While the purchases return journal is used when goods are returned by the business to its suppliers and vendors.

2.3 Bookkeeping 

The double entry for the former is to debit return inwards account and credit debtors accounts. But that of the letter is to debit creditors accounts and credit return outwards day book.

2.4 Type of Ledger used

The ledger used for sales return book is the general and the account receivables ledger. However, the purchases return book uses the general ledger and account payables ledger.

3. Conclusion

Finally, it is clear that both books are similar in some ways. However, they are also different from each other. This is because one is used for goods returned to the business by customers and the other is used for goods returned by the business to its vendors. Moreover, the cash returned does not enter the books of the original entry.