The Sales Returns Day Book
Peter Marshall Bsc (Econ) BA MBIM is a Fellow of the Society of Business Teachers, and an experienced educator in business subjects. He is also a prolific author and his books have been translated and sold worldwide. He lives in London, UK.
When a customer asks for a credit
When a firm sells goods or services on credit, it records the details in the sales day book, as we saw on the previous pages. Sometimes, however, the customer has to return what he has bought. For example the goods may be faulty, or arrived damaged. In this case, the firm sends a credit note to the customer, and the value of the credit note is then entered up in the sales returns day book.
All the points which apply to the sales day book also apply to the sales returns day book, even the ruling is identical, though of course the transaction details may be different. So once you have become familiar with the ruling of a typical sales day book, you will also have a picture of the sales returns day book in your mind.
Look at the example on the opposite page. We sold 50 litres of white gloss paint to D. Davidson (Builders) who unfortunately found them to be faulty. They returned the goods to us and we issued them with a credit note for the value plus VAT, a total of £58.75. The credit note is dated 8 March 200X. We now enter the details of this credit note in our sales returns day book as shown opposite.
- 1.On the far left we enter the date, followed by the name of the customer.
- 2.In the third column we enter the credit note number (this is usually pre-printed on credit notes outwards, but if not it must be allocated from a chronological sequence).
- 3.In the correct columns we then enter the amounts of the credit, i.e. excluding VAT—£50.00—and the VAT element of £8.75 in the VAT column.
- 4.If our sales returns day book has additional analysis columns, we ‘analyse’ the net amount into the correct one, in this case Decorators’ supplies.
The additional analysis columns can be useful, because they help us to check the value of each category of goods returned.