Return Inward Meaning
Return Inward, also known as sales return, refers to the goods returned to the business entity when the customers find that the goods delivered did not meet their expectations and, therefore, unsatisfactory. It directly affects the operating activities of the business. Hence, the returned goods are recorded in the journal called Return inward journal from the copies of the credit note that are sent to the customer who returned goods or was overcharged.
In the Journal:
- The recorded is made in chronological order, with the name of the customer and amount of goods which the customer has returned.
- Entries are recorded at a list price less than any discount provided.
- Entries are supported by credit notes which are sent to the customer.
Return Inward Example
Below is the example of Return Inward –
The below example can be understood with reference to the total amount generated in the “Return Inward Journal,” which is transferred to “Trading Account Format.” There are a various number of sales entries that are accounted for a month (time duration differs from organization to organization) are noted down serially.
Return of journal monthly total is transferred to less return in “Trading Account Format.”
- Accountability of these entries becomes useful as it mere addition of amount that has been undertaken as there is a return in sales.
- It is shown on the credit side of the “Trading Account Format.” Just below the sales, the total amount of return calculated from the “Return Inward Journal” is put into place.
- When return inward is more, this gives an indication to the company about the related to the product. These issues need to get addressed as soon as possible, as this will affect the sales of the company.
It is an important element while preparing a trading account. One can take decision based on it whether or not to continue with a required product. It helps the management deciding the price of the product.
- Each sales returns need to be debitedDebitedDebit is an entry in the books of accounts, which either increases the assets or decreases the liabilities. According to the double-entry system, the total debits should always be equal to the total credits. from the sales return account.
- Value, quantity, and reasons for sales returns can all be known from the sales return book.
- Also, the total amount of sales returns can be obtained.
- Clerical work can be reduced by using a sales return book.
- Errors committed if any, while writing the sales return book is normally detected at the time of posting to the sales return account.
- As sales return is recorded on serially in the sales return book, particulars of any sales return on any day can be located in the sales return book.
It becomes very important to include return inward, but the entire entity of it is carried in a separate journal, because of which it becomes very important to carefully note all the values in the return journal under the different heading and to update regularly. Total sales amount, if projected without return inward, would reflect the incorrect amount in the accounting.
Important Points to be Noted for Change of Return of Inward
Various software technology has introduced to record the return of inward. This is because to avoid various errors coming up in the report. But there are few elements which are essential for writing return of inward such date, details, identification no, related identification nos pertaining to the goods which need to be taken care of.
This has been a guide to What is Return Inward and its Meaning. Here we discuss return inward journal along with examples, advantages, and disadvantages. You can learn more about excel modeling from the following articles –