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9. The Returns Journals
I. Credit Notes and Debit Notes
Credit Note is a document received by a customer, showing allowance given by a supplier in respect of
unsatisfactory goods.
Credit Notes means the customer’s account in supplier’s book will be credited with the amount of goods
returned.
3. Issue Credit Note
Supplier Customer 1. Sell goods to
2. Returns faulty goods
Debit Note is a document commonly sent by a business to a supplier to claim for an allowance in respect of
damaged goods.
Debit Note means the supplier’s account in customer’s book will be debited with the amount of goods
returned.
3. Issue Debit Note too
Supplier Customer 1. Sell goods to
2. Returns faulty goods
Examples
2003
May 1 Wong purchased goods on credit from H. Lee $300
May 3 Wong returned goods to H. Lee $30
In Wong’s Book (Issue __________ Note)
Purchases2003$$
May 1H. Lee300
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H. Lee (Creditor)
$2003$
May 1Purchases300
Debit Note
Returns Outwards
$$
In H. Lee’s Book (Issue ____________ Note)
Sales
$2003$
May 1Wong300
Wong
2003$$
May 1Sales300
Credit Note
Returns Inwards
$$
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II. How returns inwards are recorded?
Credit Note
Total returns inwards Returns Inwards Journal credited to debtor’s debited to Returns Inwards account separately Account Book of original entry for returns inwards
Sales Ledger General Ledger
Debtor – Mr. Wong Returns Inwards Account
X X
Debtor – Best View Ltd.
X
Example
Lee Company Ltd. has the following transactions during the month of June 1996.
June 16 Mr. Wong returned $150 faulty goods to Lee Company Ltd. (A sample credit note is given below)
June 28 $50 goods were returned by T. Tung Ltd.
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III. How returns outwards are recorded?
Debit Note
Total returns outwards Returns Outwards Journal Debited to creditor’s credited to Returns account separately Outwards Account Book of original entry for returns outwards
Purchases Ledger General Ledger
Creditor – Mr. Chan Returns Outwards Account
X X
Creditor – Happy Ltd.
X
Example
Lee Company Ltd. has the following transactions during the month June 2003
June 15 Lee Company Ltd. returned $100 faulty goods to ABC Ltd. (A sample debit note is given below)
June 25 $120 goods were returned to T. Shing.
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