Difference Between Carriage Inwards And Carriage Outwards In The Income Statement

August 11th, 2006 Comments off
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Return Inwards:

  • Goods already sold by the company were returned to the business by the customers sometimes later.
  • Goods can be defective, not according to specification or damage.
  • When goods are returned by customers, the company issue a credit note to the customer.

 

Accounting Treatment:

 

Debit: Return Inwards Account

Credit: Customer’s Account

 

In the Income Statement:

Sales XXX

Less: Return inwards (x)

Net Sales YYY

 

Return Outwards:

  • Goods purchased from the suppliers and subsequently return to the suppliers .
  • Goods outwards maybe due to wrong quality, damage, wrong specification, etc
  • In this case when goods are returned to suppliers, credit notes will be received from the suppliers.

 

 

Accounting Treatment:

 Debit: Creditor Account

Credit: Return Outwards A/c

 

The Return Outward a/c will be debited to the Purchases account to reduce the amount as lesser value of goods are received as a result of the return of goods to the suppliers.

 

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Financial Accounting

 
 

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