Sales returns where goods being replaced

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Ravneet

Consultant

21 Points Posted on 14 November 2011

HI,

We have a case where, if the agents are unable to sell the goods it taken back in the warehouse by the distributor and he issues some other goods in place of it.

How should the accounting entry should be done in case the goods returned falled under different tax rate and the goods being issued in replacement falls under different tax rate. Example "A" a product taxed at 5% VAT is returned and in place "B" is issued which attract tax at VAT 14%. How should we do the accounting treatment in above case, also if there's any price difference in both the products how should we treat that in our books.

Regards,

Ravneet Bedi

Replies (3)

Giridhar S Karandikar

Team Lead

5675 Points Posted on 14 November 2011

As the agents are unable to sell the goods these are being returned back to the distributor. Hence there is no transactiont hat has taken place as no goods being sold to the ultimate consumer. The accounting entry will be passed only if the goods are being sold to the ultimate consumer. So if the goods replaced carry a differnt VAt rate & these are being sold to the ultimate consumer then only accounting entries need to passed.

Hope the above would clarify your doubt.

huma shehnaz

student

41 Points Posted on 02 February 2012

Hi, Ravneet,

The Question You asked seems to be related to consignment.

If thats so, then entry in the books of Consignor will be,

Goods sent on consignment A/C - Dr.

To Consignment A/C

(For goods Returned, i.e Goods having Vat - 5%)

And for the new goods sent,

entry will be,

Consignment A/C - Dr.

To goods sent on consignment A/C

(For goods sent, having Vat - 14%)

Subramanya

in practice

101 Points Posted on 04 February 2012

Hi Ravneet,

If u hav treated the transaction wid agent (at d time of sending d goods) as a sale, just pass a sales returns entry and newly distributed one as a new sale entry....

1) but if u ve not treated it as a sale, then i agree with giridhar's statement

2) if u ve treated it as a consignment sale, i agree with huma shehnaz's statement...