Accounting Dictionary

A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z

Sales Return

Definition: A sales return is merchandise sent back by a customer to the seller, usually for one of the following reasons:

• Excess quantity shipped
• Excess quantity ordered
• Defective goods
• Goods shipped too late
• Wrong items shipped

The seller records this return as a debit to a Sales Returns account and a credit to the Accounts Receivable account; the total amount of sales returns in this account is a deduction from the reported amount of gross sales in a period, which yields a net sales figure. The credit to the Accounts Receivable account reduces the amount of accounts receivable outstanding.

The Sales Returns account is a contra account.

A seller can more closely control the amount of sales returns by requiring a sales return authorization number before its receiving department will accept a return. Otherwise, some customers will return goods with impunity, some of which may be damaged and which can therefore not be re-sold.