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Dear Sir
I hope this message finds you well.
I was wondering what Returns Inwards and Returns Outwards meant in terms of company accounts:Returns Inwards are items returned TO the company, leading to a reduction (Cr) in Receivable or Cash and an Increase (Dr) in a Returns Inwards Account( which acts like an Income account)?
Returns Outwards are items returned BY the company (acting as a customer to a supplier) leading to a Reduction (Dr) in Payable and an increase (Cr) in Returns Outwards (which acts like an Expense Account)?
Is that correct ?
regardsNearly correct!
Returns Inwards are items returned TO the company, leading to a reduction (Cr) in Receivable or Cash and an Increase (Dr) in a Returns Inwards Account( which is not an income account – on the Statement of profit or loss it is subtracted from sales (sales is a credit balance).
Returns Outwards are items returned BY the company (acting as a customer to a supplier) leading to a Reduction (Dr) in Payable and an increase (Cr) in Returns Outwards (which is not an expense account – in the Statement of profit or loss it is subtracted from purchases (purchases is a debit balance)
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