What are reasons for giving credit note and sales return to
customers?

Answer Posted / abc.dinesh

In case of sales returns, "Sales return account should be
debited and not Sales account"

In case of purchase returns, "Purchase return account"
account should be credited and not "Purchases a/c"

Debit Note:

a. In case of Purchase returns, the purchaser will issue a
debit note to the suppliers so that the suppliers account
is debited on issue of debit note

b. This type of note can also be issued in case of
overcharge by suppliers (practically)

Debit Note Example: In case of credit purchases [assume
Rs.1000 worth goods], journal entry will be "Purchases Dr.
and Creditor Cr." for Rs.1000. So we are crediting the
account of creditor indicating that we have to pay Rs.1000
to our creditor. At the time of purchase return [say
Rs.200], we have to debit the account of creditor
indicating that we need not pay Rs.1000. We have to pay
finally Rs.800 only.

Journal Entry:
1) Purchases a/c Dr. 1000
To Creditor a/c Dr. 1000

2) Creditor a/c Dr.200
To Purhcase Returns a/c 200

Credit Note:

a. In case of Sales returns, the seller will issue a credit
note to the purchaser

b. The purchaser account is credited on issue of credit note

Credit Note Example:
In case of credit sales [assume Rs.1000 worth goods],
journal entry will be "Debtors a/c Dr. and Sales a/c Cr."
for Rs.1000. So we are debiting the account of customer
[debtor] indicating that we have to receive Rs.1000 from
our customer. At the time of sales return [say Rs.200], we
have to credit the account of debtor indicating that we are
not going to received Rs.1000. We have to receive finally
Rs.800 only.

Journal Entry:
1) Debtor a/c Dr.1000
To Sales a/c 1000

2) Sales Return a/c Dr. 200
To Debtor a/c 200

Credit note will be from Seller point of view and Debit
note from purchaser point of view

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