Returns and Allowances

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 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.

The Sales Return & Allowances Journal has these basic features:

Header with the Name of the Journal and Page
Entry Number used as a reference to a specific transaction on the journal's page
Date Column to record the date of the transaction
Description Column to record the Customer's name or account and any other explanation or additional information about the transaction
Reference Column to record our sales invoice numbers
Posting Reference to provide information when a Subsidiary Ledger also needs to be updated. This tells us whether the Subsidiary Accounts Receivable Ledger has also been posted (updated).
A Column to debit the Sales Return & Allowances Account and also credit the Accounts Receivable Control Account.

Our illustrated Sales Return & Allowances Journal has a Column for debiting the Sales Returns & Allowances Account and crediting the Accounts Receivable Control Account.

Sample Sales Returns & Allowances Journal

The X's in the Posting Reference Column tell you that the amounts have been posted to the General Ledger and Subsidiary Ledger.

Entry Number SRA-12 is the reference to the Sales Returns and Allowances Journal to use as the reference in the General Ledger Accounts.

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 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.

The Purchase Returns & Allowances Journal has these basic features:

Header with the Name of the Journal and Page
Entry Number used as a reference to a specific transaction on the journal's page
Date Column to record the date of the transaction
Description Column to record the Supplier's name or account and any other explanation or additional information about the transaction
Reference Column to record our invoice numbers
Posting Reference to provide information when a Subsidiary Ledger also needs to be updated. This tells us whether the Subsidiary Accounts Payable Ledger has also been posted (updated).
A Column to debit Accounts Payable Control Account and also credit the Purchase Returns & Allowances Account.

Our illustrated Purchase Returns & Allowances Journal has a Column for debiting the Accounts Payable Control Account and crediting the Purchases Returns & Allowances Account.

Sample Purchase Returns & Allowances Journal

The X's in the Posting Reference Column tell you that the amounts have been posted to the General Ledger and Subsidiary Ledger.

Entry Number PRA-12 is the reference to the Purchases Return Journal to use as the reference in the General Ledger Accounts.

What's Next ?

Sales & Purchase Returns Journals Video