Question

When you go into a store and buy a candy bar. And if, for some reason, the buyer did not eat the candy bar, but chose to return it. Then what would the accounting be?

Answer 1

Customers, generally, return the goods they purchase from an organisation if they are not satisfied. When a sales return happens, the customer physically returns the product and receives his money back.

Accounting for a sales return involves reversing

(a) the revenue accounted at the time of sale

(b) the related COGS (cost of goods sold).

Revenue can be reversed by debiting the sales returns account by the amount of original sale and crediting accounts receivable account if it was a credit sale or cash account if it was a cash sale.

You can also debit the sales account directly and credit accounts receivable or cash.Net sales will be gross sales minus sales returns.

When a product is physically returned, it increases inventory and decreases related cost of goods sold recognized at the time of sale.