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15.1 Returning goods
The document discusses returning goods that were purchased on credit. It explains that sometimes goods need to be returned if they are unsatisfactory, and a credit note is issued to acknowledge the return. It provides an example where a customer returns damaged jackets to a business, who then returns the jackets to their supplier. Both the customer and business receive credit notes for the returned goods.
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15.1 Returning goods
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- 2. © Michael Allison,Trinity Grammar School. Author’s permission required for external use A business both buys and sells goods on credit Sometimes these goods are returned because they are deemed to be unsatisfactory because: • They were the wrong size or colour • They were unfit for their intended purpose • They were the wrong brand name • They were the wrong style • They were delivered late and were no longer required • They were damaged or faulty 15.1 RETURNING GOODS
- 3. © Michael Allison,Trinity Grammar School. Author’s permission required for external use • When a customer returns a good bought on credit, or when the business returns goods bought on credit to a supplier, a new type of source document is issued – a Credit Note – which acknowledges that goods have been returned Name of seller – this is who sold the damaged or unwanted goods Name of customer – this is who returned the goods and who now has a credit Credit Note # - each Credit Note has a unique number Reason for credit– explains why the customer returned the goods 15.1 RETURNING GOODS
- 4. © Michael Allison,Trinity Grammar School. Author’s permission required for external use • Usually the flow of goods goes… • But sometimes the goods go the other way… Supplier Business Customer Supplier sells stock to the business Business sells stock to the customer Supplier Business Customer Purchase Return Business returns stock to the supplier Sales Return Customer returns stock to the business Purchase Sales 15.1 RETURNING GOODS
- 5. © Michael Allison,Trinity Grammar School. Author’s permission required for external use Purchase Return When the business returns stock to the supplier Business Customer Sales Return Customer returns stock to the business Supplier Business 15.1 RETURNING GOODS
- 6. © Michael Allison,Trinity Grammar School. Author’s permission required for external use 15.1 RETURNING GOODS • Example: • Classic Clothing sold 3 jackets to Jim Johnson for $70 each (plus GST) • Jim Johnson returned 3 jackets to Classic Clothing because they were damaged • Classic Clothing gives Jim Johnson a credit for $70 per jacket (plus GST) • Classic Clothing then returns the damaged jackets to her supplier, Wholesale Clothing for a credit of $30 each (plus GST) Supplier Business Customer Sale $210 + GSTCredit $210 + GSTCredit $90 + GST Classic Clothing Date 1 Jan 2015 123 Main Street Credit Note: 1 Camberwell VIC 3124 Credit to: Jim Johnson 99 Smith Street Kew VIC 3101 Qty Item Unit Cost $ 3 Jackets 70.00 210.00 10% GST 21.00 Reason: damaged goods Total 231.00 Wholesale Clothing Date 1 Jan 2015 91 Melbourne Avenue Credit Note: WC5 Melbourne VIC 3000 Credit to: Classic Clothing 123 Main Street Camberwell VIC 3101 Qty Item Unit Cost $ 3 Jackets 30.00 90.00 10% GST 9.00 Reason: damaged goods Total 99.00 Wholesale Clothing Classic Clothing Jim Johnson
- 7. © Michael Allison,Trinity Grammar School. Author’s permission required for external use Supplier Business Customer Wholesale Clothing Date 1 Jan 2015 91 Melbourne Avenue Credit Note: WC5 Melbourne VIC 3000 Credit to: Classic Clothing 123 Main Street Camberwell VIC 3101 Qty Item Unit Cost $ 3 Jackets 30.00 90.00 10% GST 9.00 Reason: damaged goods Total 99.00 Classic Clothing Date 1 Jan 2015 123 Main Street Credit Note: 1 Camberwell VIC 3124 Credit to: Jim Johnson 99 Smith Street Kew VIC 3101 Qty Item Unit Cost $ 3 Jackets 70.00 210.00 10% GST 21.00 Reason: damaged goods Total 231.00 Wholesale Clothing Classic Clothing Jim Johnson Jim Johnson returned 3 jackets to Classic Clothing Classic Clothing returned 3 jackets to the supplier Wholesale Clothing 15.1 RETURNING GOODS
- 8. © Michael Allison,Trinity Grammar School. Author’s permission required for external use • Where would a return of damaged or unwanted goods be recorded? 15.1 RETURNING GOODS Cash receipt Cheque butt Sales invoice Purchase invoice Cash Receipts Journal Cash Payments Journal Sales Journal Purchases Journal Any cash received? Any cash paid? Credit sale made? Credit purchase of stock made? Memo General Journal Any other transaction? Credit Note
- 9. © Michael Allison,Trinity Grammar School. Author’s permission required for external use TASK In-class Homework SQ1 X SQ2 X