The return inwards day book is a subsidiary book used for recording items of goods that were returned to the business. It doesn't record cash refunded to the business. Therefore, it is the transactions relating to the sales of goods that are returned are posted to the sales returned journal.
1. What's return inwards day book
The return inward day book is also referred to as the return inward journal, sales return day book, or sales return journal. It is the book of original entry that is used to record sales of goods returned to the business. Note that only goods returned are posted to this account. Therefore, cash returned as a result by clients are not recorded to this account but are posted to the cash book. The source document for sales return is the debit note. However, at times a credit note might be required.
2. Double entry for Return inwards day book
When goods are returned, they are posted on the return inward day book. Note that this day's book is not part of the books used in applying the double entry principle. Therefore, the items posted there are accumulated and posted to their respective ledger accounts. Therefore, the return inwards account in the general ledger is debited while the individual customer accounts in the account receivables ledger are credited.Â
This is stated below
- Dr: Return inwards account
- Cr: Individual customer accounts
3. Four (4) reasons why customers my return goods to the business
Customers will return goods to the business for the following reasons:
3a. Overstocking
When a customer notices that it has bought goods more than needed, he or she may request the entity to accept the return of the unused stock. This is a positive reason to return inwards. In this case, the customer may issue a credit note (to correct the overcharge) to the entity that has a proof.
3b. Bad or defective products
If some items of the goods or product bought are defective, then, the goods may be returned. Some entries have a warranty that protects their customers. It enables them to return goods that become defective during the warranty periods.
3c. Wrong specification
Another reason why customers may return goods to the entity is wrong specification. This usually happens when the customer buys the goods in a hurry. Therefore, he failed to cross-check if the right specification was sold to him or her.Â
3d. Incorrect measurement
If the measurement of the items is lower than the price attached to it, the customer might return the goods or request for the balance value. It can also occur reversely. That is, the entity staff has sold more of the item for a lower value. Therefore, he will persuade the customer to return the goods. If not, Otilo! The staff may have to pay for the goods.
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