Sometimes the goods are sent to the buyer with an option to keep them or return them. This is known as Goods sold on approval or return basis. When the goods are sold on approval or return basis there is a change in the possession of goods. However, the ownership of goods is transferred only when the goods are approved by the buyer. We will here discuss the treatment for Goods sent numerously.
Goods Sent Numerously
When goods are sent numerously on sale on approval or return basis, then it is advisable to keep a separate set of books. For this purpose Sale or Return Day Book and Sale or Return Ledger are maintained. However, both these books are Memorandum Books.
Goods sent to the customer on sale on approval or return basis are recorded in the Sale or Return Day Book. Thereafter, the customer’s accounts are individually debited in the Sale or Return Ledger while the Sale or Return A/c is credited with the total of the Sale or Return Day Book.
In terms of goods sent numerously, goods returned by the customer within the specified time limit are first recorded in the Sale or Return Day Book. After this, the customer’s accounts are individually credited in the Sale or Return Ledger while the Sale or Return A/c is debited with the total of the Sale or Return Day Book.
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Goods accepted by the customer and the goods regarding which no intimation is received within the specified time limit are treated as sales. These are recorded in Sales Day Book. The customer’s accounts are individually debited while the Sales A/c is credited with the total of the Sales Day Book. In order to cancel the earlier entries, individual customers accounts are credited and the Sale or Return A/c is debited.
Browse more Topics under Sale Of Goods On Approval Or Return Basis
- Goods sent Casually
- Goods sent Frequently
Journal Entry for Approved Goods sent Numerously
In the Memorandum Sale or Return Ledger
Date | Particulars | Â | Amount (Dr.) | Amount (Cr.) |
1. When the goods are approved | Sale or Return A/c | Dr. | Â xx | Â |
To Individual Customer’s A/c |  xx | |||
(Being goods approved at invoice price and earlier entry canceled) | Â |
In the regular General Ledger
Date | Particulars | Â | Amount (Dr.) | Amount (Cr.) |
1. When the goods are approved | Individual Customer’s A/c | Dr. |  | |
To Sales A/c | Â | |||
(Being goods approved at invoice price and treated as sales) | Â |
 At the end of the year, the credit balance of the Sale or Return A/c in the Sale or Return Ledger represents goods still awaiting approval. These goods are treated as inventories and recorded in the Regular books of accounts.
Journal Entry for recording inventories
Date | Particulars | Â | Amount | Amount |
1. For the goods lying with the customer at the year-end | Inventories with customers on Sale or Return A/c | Dr. | Â xx | Â |
To Trading A/c | Â xx | |||
(Being goods waiting for approval recorded as inventory at cost/market price, whichever is less) | Â |
Solved Example For You
Q. M/s Kamath Textiles supplied goods on Sale on approval or return basis to its customers. The transactions for the month of March 2018 are as under:
Date | Customer’s Name | Amount (₹) | Remarks |
5 Mar | A Ltd. | 10000 | Accepted on 16 March |
9 Mar | B Ltd. | 16000 | Returned goods worth ₹6000 on 13 March |
11 Mar | STR Ltd. | 11000 | No intimation till 31 March |
15 Mar | XYZ Ltd. | 25000 | Accepted goods worth ₹20000 on 20 March, balance returned. |
20 Mar | KM Ltd. | 30000 | No intimation till 31 March |
25 Mar | CBZ Ltd. | 8000 | Returned on 30 March |
30 Mar | P Ltd. | 12000 | No intimation till 31 March |
Goods have to be returned within 15 days else they will be treated as sales. Prepare the Sale or Return Day Book and Sale or Return Total A/c.
Ans. In the books of M/s Kamath Textiles
Sale or Return Day Book
Date | Customer’s Name | L.F. | Amount (₹) | Date | Sold (₹) | Returned (₹) |
5 Mar | A Ltd. | 10000 | 16 Mar | 10000 | – | |
9 Mar | B Ltd. | 16000 | 13 Mar | 10000 | 6000 | |
11 Mar | STR Ltd. | 11000 | 26 Mar | 11000 | – | |
15 Mar | XYZ Ltd. | 25000 | 20 Mar | 20000 | 5000 | |
20 Mar | KM Ltd. | 30000 | – | – | – | |
25 Mar | CBZ Ltd. | 8000 | 30 Mar | – | 8000 | |
30 Mar | P Ltd. | 12000 | – | – | – | |
112000 | Â | 51000 | 19000 |
Sale or Return Total A/c
Date | Particulars | Amount | Date | Particulars | Amount | |
31 Mar | To Returns | 19000 | 31 Mar | By Goods sent on sale or return | 112000 | |
To Sales | 51000 | |||||
To Balance c/d | 42000 | |||||
112000 | 112000 |
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