Returns Inwards and Returns Outwards.

Returns Inwards: These are goods that have been returned by customers due to various reasons e.g.

• They may be defective/damaged,
•  Being of the wrong type.
• Excess goods being delivered.

Goods returned may relate to cash sales or credit sales. For the goods returned in relation to cash sales and cash is refunded to the customer the following entries are made:

• Debit returns – inwards
• Credit cashbook.

For goods returned that relate to credit sales; no cash has been given to customer, the following entry is to be made.

• Debit returns inwards.
• Credit debtors.

Returns Outwards: These are goods returned to suppliers/creditors. They may be for cash purchases or for credit purchases. For cash purchases a cash refund given to the firm by the supplier,

• Debit the cashbook (cash at bank/hand).
• Credit returns outwards.

For credit purchases and no refund has been made:

• Debit creditors.
• Credit returns outwards.