Compare return inward and return outward

The major differences between a return inward and a return outward are as follows −

Return inward

• Return inward is defined as the seller returning the goods back due to various reasons (defective, incorrect goods etc.)
• Return inward transactions starts, when the seller receives sold goods back.
• It occurs next to return outwards.
• The journal entry for return inward is as follows −

• It is recorded in seller books of accounts.
• Impact − Reduces seller sales and creates liability.
• In financial statements, it is disclosed in reduction from sales in the seller trading account.
• The consequences are goods resale or refund for sale.
• The format of return inward is as follows −

Return outward

• Return outward is defined as, goods returned back by buyer to seller.
• Return outward transactions start, when the buyer returns the purchased goods.
• Occurs before returning inward.
• The journal entry is as follows −

• Recorded in buyers' books of accounts.
• Impact − Reduces buyer purchases, creates assets.
• Disclosed as reduction in buyer trading account in financial statements.
• The consequence is that it pays an amount or exchange (new goods)
• The format is as follows −

Nagasravan Tamma

Updated on: 13-Jul-2021

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