Think about what it is doing. Sales have been made and some of those may be faulty or the wrong goods sent out (and returned). The sales returns account reduces the sales made by basically reversing out the transactions.
One way to do that would of course be to use the sales account with a negative entry. However, management might want to know percentages of returns so its a good idea to keep returns recorded seperately.
If you don't mind me asking, which books are you studying from and for which exam?
Hope the above helps,
kindest regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
thanks Shaun for reply. I read osbourne books ' bookkeeping' plus i watch youtube clips prepaired by firstintuition. They did good job.
I haven't planned exams yet . At the moment I negotiate with people at work part time job since I need more time for studying.
Do you mean that since sales accounts record totals, it would be impossible for management to identify seperate returns?
Even though sales and sales returns are kept as seperate totals on the income statement they are (generally) consolidated in a single field.
For example.
Imagine you make £100k sales and you get £5k sales returns. The value shown on the income statement will be consolidate as £95k sales rather than showing the sales and sales returns seperately as that better reflects the reality of the sales (if you showed it as £100k sales with returns seperate then sales would be overstated).
Where keeping the sales returns field is useful is in management reporting.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
