Accounting Treatment of Return of Expired Medicine

Dear Vivek,

Following is the entry to be passed in the above case:-

Goods Return (Medicine) A/c     Dr.                   XXX

             To Purchases A/c                                                XXX

(Being medicines expired therefore returned back to Co.)

Regards,

Devendra Kulkarni

Hi Vivek

If the medicines are expired will the retailer have the right to return them to the company.

If yes then these will be needed to be viewed for the "passing of significant risks and rewards"..if the retailer can return un expired medicines then the risk of expiry is with the company and not with the customer and the revenue recognition can be questioned.

However where the company has adequate documentation and information on hand to show that the risk of expiry is low and is not material and rare, then they may based on past experience calculate a probability of return percentage and make a provision for returns. This can be used to settle sales returns liabilities.

So entry can be..

At sale :

Sundry Drs ...Dr

Sales.............Cr

Prov for return...Cr

On return of the goods :

Prov for return of sales...Dr

Sundry Crs / Bank ..........Cr

Other views welcome