The compilation of these Recording Transactions Notes makes students exam preparation simpler and organised.
Sales (Journal) Book and Sales Return Book
Every now and then, a business makes various sales in order to gain some form of revenue. These sales validate the purpose of a business. They provide a lifeline to a business and give them a reason to exist. Without sales, a business would find its existence redundant. Let us study in detail the preparation of a sales book and a sales return book.
A Sales book is a record of all credit sales made by a business. It is one of the secondary books of accounts and unlike cash sales which are recorded in the cash book, the sales book is only to record credit sales. The amount entered in the sales book is on behalf of invoices supplied to purchasers. A Sales book is also called Sales Journal or Sales Day Book.
For example, the following entries of sales appear in the books of ABC Ltd.
Jan 7 – Sold 10 Keyboards to A & Co. for 300 each.
Jan 24 – Sold 5 headphones to X & Co. for 200 each.
The sales book of ABC ltd will appear as follows:
A credit sales will be recorded by passing the following journal entry:
Debtors A/c – Dr.
To sales A/c
Sales Return Book
When a business sends back the ordered goods to a vendor, it is recorded in the sales return book. At times the buyer may return goods due to the poor quality of the product, an inaccurate quantity of the product, untimely delivery or other such reasons.
It is also called returns inward and an appropriate sales return or a returns inward book is maintained for recording entries related to the same. All returns are primarily recorded in the sales return book unless the returns are not that frequent, in which case they are recorded in the journal.
Entries for sales returns are recorded by passing the following journal entry:
Sales return A/c – Dr.
To Debtors A/c
After the sales return book is properly updated and all transactions are entered into the book, the total of the items is transferred to the ledger in an account called the Sales returns account. At the end of the day, each entry is posted to the credit side of the appropriate individual’s account in the Debtors’ ledger as this helps the account to remain up to date.
Show how the following events will appear in the ledger accounts.
Total sales returns made at the end of a month are for 50,000, including returns made by A for 30,000 and returns made by B for 20,000.
Sales Returns A/c
Sundry Debtors A/c