Sales Returns

A sales return occurs when a customer returns an item to a store and requires a refund.

A business may make a sale to a customer.

If a cash sale, the business will deposit the money in the bank.

To record a cash sale, you credit the sales account.

This shows money came from sales.

At the same time, you debit the checking account.

This shows that the money was deposited in the bank.

Some customers will return goods they have bought.

When this happens, the business will refund the customer’s money.

So to record the transaction, you credit the checking account.

This shows that money has come from the bank.

After that, you debit the sales returns account.

This shows the money was used for sales return

Had the sale been a credit sale, the entries would be similar.

You would credit the customer’s account.

Then you debit the sales returns account.

The sales return account is classified as a revenue account.

But because it balances on the debit side, it is also classified as a contra account.

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