Return inwards and Return outwards are deducted from?

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Return Inwards

The return inwards arises when goods that are sold are returned back and hence it has to be deducted from the number of sales.

For Example,

I am a dealer in smartphones and I sell them on amazon and amazon has 30 days replacement guarantee scheme especially when the customer buys a certain electronic item. Hence for me when the customer returns the smartphone that he purchased it becomes a return inward and so it will be deducted from my sales.


Return Outwards

The return outwards arises when the goods purchased are returned either the entire order or only a part of it. Hence, it will be deducted from Purchases.

For Example,

I am a watch dealer and I have placed an order with my supplier to supply 20 Smart Watches but he sent me 5 watches of another model so I return them. This is a case of return outward as I am sending goods back to the supplier and hence it shall be deducted from my purchases.


I guess if you are still not clear with the answer above the below-inserted image may help

Presentation of Return Inward and Outward in Income Statement