Singh Arjun

Return inwards and Return outwards are deducted from?

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  1. This answer was edited.

    Return Inwards

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


     

    Aastha Mehta

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