chapter 7: returns journals

Question 1

differentiate between the debit and credit note

Answer 1

debit note- document sent by buyer to seller with returned goods
credit note- decument sent by seller to buyer for return of goods

Question 2

explain return inwards and returns outwards

Answer 2

returns inwards- when the customer returns goods to the business
returns outwards- when the business returns goods to the supplier

Question 3

what could be the possible reasons for returns?

Answer 3

• goods were damaged when delivered/ in transit
• prices on the invoice are different from quoted prices
• customers are not happy with the goods(rotten, expired, poor quality)
• more goods have been delivered than ordered

Question 4

why are the reutrns journals used?

Answer 4

creditors returns journal- book of first entry used for purchases reutrns
- provieds total purchases reutrns amount for the month
- reduces number of entries in purchases returns account
- provides purchases returns figure needed to draw up a control account
- for inventory control purposes

debtors returns journal- book of first entry used for sale returns
- provides total sales returns amount for the month
- reduces number of entries in sales returns account
- provides total sales returns figure needed to draw up a control account
- for inventory control purposes

Question 5

what is the purpose of a credit note?

Answer 5

• to acknowledge the receipt of the debit note
• to give approval that goods may be returned
• used to indicate and rectify errors such as overcharging.
• source document for returns transaction