So, you want to learn
Bookkeeping!
Special Journals
by Bean Counter's Dave Marshall

Lesson 5
Sales and Purchase Return Journals


Introduction Lesson 1 Lesson 2 Lesson 3 Lesson 4 Lesson 5 Lesson 6
Bean Counter
Sales Returns and Allowances Journal

Definition: The Sales Return & Allowances Journal is a special journal that is used to record the returns and allowances of merchandise sold on account.

The entries made in this journal are a credit to the Accounts Receivable Control Account (also a credit to the customer's Accounts Receivable Subsidiary Ledger Account) and a debit to the Sales Returns and Allowances Account.

The X in the posting reference column tells us that we have posted the return to our customer's Accounts Receivable Subsidiary Ledger. The (X)'s tell us that the summarized totals for the period have been posted to our General Ledger Accounts. The SRA-12 is our reference number for posting purposes. The SRA is our abbreviation for our Sales Return and Allowance Journal and the 12 references the month of December.

Sales Returns and Allowances Journal Page 1
Entry No. Date Customer Account
Name/Description
Invoice Number Post Ref. Debit-Sales Returns & Allowances
Credit-Accounts Receivable
1 Dec 5, xxxx Fix-It Auto 990 X 1000
2 Dec 20, xxxx Widget Manufacturing 995 X 1400
3 Dec 31, xxxx Good Books Store 976 X 250
           
SRA-12   Totals For Month   (X)/(X) 2650

Does this Journal look familiar ? It should. This journal is very similar to our Sales Journal that only used one column for recording the debit and credits amounts. The only difference is that the Debit and Credit Accounts are different.

I also provided an alternative journal for those of you that prefer the multi-column or needing to track sales taxes.

Sales Returns and Allowances Journal Page 1
Entry No. Date Customer Account
Name/Description
Invoice Number Post Ref. Debit-Sales Returns & Allowances Debit-Sales Tax Payable Credit-Accounts Receivable
1 Dec 5, xxxx Fix-It Auto 990 X 1000   1000
2 Dec 20, xxxx Widget Manufacturing 995 X 1400   1400
3 Dec 31, xxxx Good Books Store 976 X 250   250
               
SRA-12   Totals For Month     2650   2650
          (X)   (X)

What about sales returns and allowances other than merchandise ? You have two options available. One you can record the entry in your General Journal or you can record the entry in your Sales Journal.

Your entry would be a debit to the sales account and a credit to Accounts Receivable Control (and of course the customer's Accounts Receivable Subsidiary Ledger Account). I prefer using the Sales Journal.

The source document prepared to document sales returns and allowance can be a "credit" invoice or what is called a credit memo. Why the term credit ? Because we our crediting (reducing) the balance that our customer owes us.

Purchase Returns and Allowances Journal

Definition: The Purchase Returns & Allowances Journal is a special journal that is used to record the returns and allowances of merchandise purchased on account.

The entries made in this journal are a debit to the Accounts Payable Control Account (also a debit to the supplier's Accounts Payable Subsidiary Ledger Account) and a credit to the Purchases Returns and Allowances Account.

The X in the posting reference column tells us that we have posted the return to our supplier's Accounts Payable Subsidiary Ledger. The (X)'s tell us that the summarized totals for the period have been posted to our General Ledger Accounts. The PRA-12 is our reference number for posting purposes. The PRA is our abbreviation for our Purchases Return and Allowances Journal and the 12 references the month of December.

Purchase Returns and Allowances Journal Page 1
Entry No. Date Supplier Account/Name/Description Invoice Number Post Ref. Debit-Accounts Payable
Credit-Purchase Returns and Allowances
1 Dec 15, xxxx Wholesale Supply 897 X 500
2 Dec 20,xxxx We Make Good Computers 5051 X 800
           
PRA-12 Dec 31, xxxx Totals for Month   (X)/(X) 1300

I also provided an alternative journal for those of you that prefer the multi-column journal.

Purchase Returns and Allowances Journal Page 1
Entry No. Date Supplier Account/Name/Description Invoice Number Post Ref. Debit-Accounts Payable Credit-Purchase Returns and Allowances
1 Dec 15, xxxx Wholesale Supply 897 X 500 500
2 Dec 20,xxxx We Make Good Computers 5051 X 800 800
             
PRA-12 Dec 31, xxxx Totals for Month     1300 1300
          (X) (X)

What about returns and allowances other than merchandise we have purchased ? You have two options available. One you can record the entry in your General Journal or you can record the entry in your Purchases Journal.

Your entry would be a credit to the expense account and a debit to Accounts Payable Control (and of course the supplier's Accounts Payable Subsidiary Ledger Account). I prefer using the Purchases Journal.

The source document prepared by your supplier and sent to you to document your returns and allowance can be a "debit" invoice from your supplier or what is called a debit memo. Why the term debit ? Because we our debiting (reducing) the balance that we owe to our supplier.

Hopefully if you're picking the right suppliers and providing quality products and/or services to your customers you shouldn't have many returns and allowances transactions to record.

We're getting close to the finish line.
Don't fall asleep on me yet !

I'm still being a nice guy-no quiz. In the next lesson I turn "mean". You guessed it. A Final Exam is awaiting you. You didn't think I was going to let you skate forever did you ?

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Introduction Lesson 1 Lesson 2 Lesson 3 Lesson 4 Lesson 5 Lesson 6
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