Return inwards refer to the goods returned to an organization by its customers. They are goods which were sold, but usually, because of being unsatisfactory, were returned back by the customers. They are also called the Sales returns.
Returns in accounting refer to the goods returned by a business to its suppliers or by a customer to a business. In one case, it is a sales return and in the other, it is a purchase return. The transaction in both cases is reversed and the concerned sale or purchase couldn’t happen.
Return inwards or Sales return reduce total sales of a company and the deduction is shown in the trading account. A subsidiary book, namely Sales returns/Returns inward, is made to record all such entries.
Journal Entry for Return Inwards
|Return Inwards A/C||Debit|
|To Customer’s A/C||Credit|
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Let’s suppose, a customer Star Pvt Ltd returned goods worth 5,000 to Unreal Corp. The journal entry to record these sales returns in the books of Unreal Corp. will be:
|Return Inwards A/C||5,000|
|To Star Pvt Ltd. A/C||5,000|
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