Goods sent Frequently

The goods sold on approval or return basis implies that the goods are sent to the buyer on a condition that if he likes the goods he can keep them else returns them. The best example of these sales can be online sales from sellers like Amazon, Flipkart, Paytm, etc. In this case, the sale is recorded only when the goods are approved by the buyer. We will here discuss the treatment for Goods sent frequently.

Goods sent Frequently

When the goods are sent frequently on sale on approval or return basis, they are not treated as sale immediately. Until and unless the buyer or the receiver of the goods indicates that he intends to purchase the goods or has decided to purchase the goods through some action or otherwise, the seller continues to be the owner of the goods.

In this case, a separate Sale or Return Day Book is maintained. This is a memorandum book. It is divided into four columns viz. Goods sent on Approval, Goods returned, Goods approved and Balance.

Browse more Topics under Sale Of Goods On Approval Or Return Basis

• Goods sent Casually
• Good sent Numerously

The Performa of the Sale or Return Day Book:

Goods sent on Approval				Goods returned				Goods approved				Balance
1	2	3	4	5	6	7	8	9	10	11	12	13
Date	Particulars	Fol.	Amt.	Date	Particulars	Fol.	Amt.	Date	Particulars	Fol.	Amt.

When the goods sent frequently for approval they are recorded in column 1 to 4 at the sale price. The customer’s A/c in ‘Goods on Approval Ledger’ is debited with the sale price. At the end of the period, the total of column 4 is posted to the credit of Total Goods on Approval A/c in the same ledger.

In case the goods are returned, they are recorded in column 5 to 8. The individual amounts are credited to the customer’s accounts. At the end of the period, the total of column 8 is posted to the credit of Total Goods on Approval A/c.

Goods approved and accepted by the customers are recorded in column 9 to 12. The individual amounts are credited to the customer’s accounts. At the end of the period, the total of column 12 is posted to the credit of Total Goods on Approval A/c. Also, the individual amounts are now posted to the debit of customer’s accounts in the Sales Ledger. At the end of the period, the total of column 12 is posted to the Sales A/c in General Ledger. Thus, now the goods approved are treated as sales.

The balance is calculated by deducting the amount of column 8 and 12 from the amount of column 4. This amount signifies the value of goods still waiting for approval from the customers.

(Source: istockphoto)

Journal Entries for Goods sent Frequently

Date	Particulars		Amount	Amount
1. When goods are approved	Debtors A/c / Customer’s A/c	Dr.	xx
	To Sales A/c			xx
	(Being goods sent on return or approval basis  approved and recorded at Sale Price)
2. For treating the goods sent on approval or return basis as closing stock	Goods sent on Approval or Return basis A/c	Dr.	xx
	To Trading A/c			xx
	(Being goods sent on approval or return basis recorded as closing stock at cost or market price, whichever is lower)

Solved Example For You

Q. GE Electronics sends goods on sale on approval or return basis to its customers. The following are the transactions for March 2017:

1 Mar. Sent goods to Amit on sale on approval or return basis   ₹10000

5 Mar. Goods approved by Amit                                                  ₹ 3000

7 Mar. Goods returned by Amit                                                    ₹2000

7 Mar. Sent goods to Bala on sale on approval or return basis   ₹15000

7 Mar. Goods approved by Amit                                                  ₹ 2000

8 Mar. Sent goods to Daya on sale on approval or return basis   ₹30000

8 Mar. Goods returned by Bala                                                   ₹5000

10 Mar. Sent goods to Bala on sale on approval or return basis   ₹5000

16 Mar. Goods approved by Daya                                                  ₹ 3000

20 Mar. Sent goods to Amit on sale on approval or return basis   ₹20000

The goods are sold at cost plus 25%. Prepare the Sale or Return Day Book.

Ans.

Sale or Return Day Book:

Goods sent on Approval				Goods returned				Goods approved				Balance
1	2	3	4	5	6	7	8	9	10	11	12	13
Date	Particulars	Fol.	Amt.	Date	Particulars	Fol.	Amt.	Date	Particulars	Fol.	Amt.
1	Amit		10000									10000
								5	Amit		3000	7000
7	Bala		15000	7	Amit		2000	7	Amit		2000	18000
8	Daya		30000	8	Bala		5000					43000
10	Bala		5000									48000
								16	Daya		3000	45000
20	Amit		20000									65000
			80000				7000				8000