Accounting for Sale return

As it is said that the goods are sold and even the amount due on that is  paid to the co. but the sales return was in FY 2006-2007, there will be no accounting effect in the FY 2005-2006.

But in the FY 2006-2007 so much of the goods returned are to be treated as the purchases.

The One Says:

I understand the problem to be treatment of goods returned in the current year, though the payment was made for the same by the purchaser in the year of sale that is the previous year.

This is indeed a unique problem. Ms. Radhika has pointed out a treatment in the form of addition to purchases.

But you could show it as a seperate item considering the unique nature of the transaction (or a treatment akin to free samples received) and the stock could be adjusted as you would do with any normal purchases.

Important part would be to negate the profit element before adding to stock. Since this is not purchases the amount can be the any amount so long as it is prudently determined.

Now, regarding sales tax (since you have mentioned the sales tax forms), this is not a sales return. So does not qualify for reduction.