Introduction To Sales Books and Sales Return Books
Sales are a crucial aspect when it comes to businesses or organizations. The sales can range from dozens to thousands per day depending on the size of the business or the organization. Hence, it makes sense for maintaining a separate Sales Book and a Sales Return Book.
Sales are a very significant part of all organizations. To understand the concept of Sales in detail let’s have a look at Sales Book and Sales Return Book.
Sales Book: A Sales Book is a Subsidiary Book and hence; Sales Book does not contain a Trade Discount and other details given in the invoice.
Sales Return Book: Sometimes goods sold might be defective or of low quality, hence; the customer may return them. In such cases, goods that are sold and are returned by the customer or buyer are given goods recorded in the Sales Return Book
What Are Sales Books?
The Sales Book is regarded as the subsidiary book which is also called a book of original entry. The Sales Book or the sales day book consists of the records of the all-credit sales of goods or products. On the other hand, a cash book contains the records of the all-cash sales of the goods.
The entries of the Sales Book are made using the net amount of the invoice. Hence, the Sales Book does not have a trade discount. The other such details are found in the invoice.
Each month the total in the Sales Book is noted on the credit side of the sales a/c, which is the ledger a/c. However, the individual accounts of the consumers are posted daily. Furthermore, if the volume of the transaction entries is too huge, the entries in the sales a/c are posted even weekly or fortnightly.
The seller also prepares the invoices in either two or more copies. This invoice consists of the details of the terms of the payments, sales, etc. The Performa of the Sales Book is shown below:
What Are Sales Return Books?
It often happens that the goods that are sold tend to be defective or of lower quality and therefore, the customer would return them. Hence, the Sales Return Book is used to record the goods sold which are returned by the customers. However, the sales returns book is used to record only the goods which were earlier sold on a credit basis.
A credit note is made to prepare each return of the goods and is prepared in duplicate. The credit note consists of the name of the customer, the details of the goods that they have returned, and the reason for the return. Every credit note has a date and is numbered serially. The credit note is regarded as the source document for the entries in the Sales Return Book.
The customer who bought the goods can also prepare a debit note. This is made when the goods are sent back to the seller and hence, is sent to him. The Performa of the Sales Return Book is as follows:
Solved Example
Example:
Record the transactions as follows in the books of M/s. Z and Co. Also, the ledger determines the ledger accounts.
Solution:
In the books of M/s. Z and Co. the entries given below will look like this.
Sales Return Book
The entries, when recorded in the books of the individual traders will look as given below.
MNC Ltd. A/c
D Ltd. A/c
X Ltd. A/c
Sales Return A/c
FAQs on Sales Book vs. Sales Return Book: Differences Explained
1. What is the main purpose of maintaining a Sales Book?
A Sales Book, also known as a Sales Day Book, is a special journal used to record all credit sales of goods. Its main purpose is to keep a detailed, chronological record of these specific transactions in one place, which prevents the General Ledger from becoming overcrowded and makes tracking sales to different customers easier.
2. What is a Sales Return Book and when is it used?
A Sales Return Book, also called a Returns Inward Book, is used to record goods that are returned by customers. These are typically goods that were originally sold on credit. It is used when customers return items due to defects, wrong shipments, or other quality issues.
3. What is the primary difference between a Sales Book and a Sales Return Book?
The primary difference lies in the type of transaction they record. The Sales Book tracks the outflow of goods sold to customers on credit. In contrast, the Sales Return Book tracks the inflow of goods returned by those same customers.
4. How is a Sales Book different from a Sales Account?
This is a common point of confusion. A Sales Book is a subsidiary book where individual credit sale transactions are first recorded. A Sales Account, on the other hand, is a ledger account that shows the total summary of all sales (both cash and credit) for an accounting period. The total from the Sales Book is periodically posted to the Sales Account.
5. What is the connection between a Credit Note and the Sales Return Book?
A Credit Note is the source document that initiates an entry in the Sales Return Book. When a customer returns goods, the seller issues a Credit Note to confirm that the customer's account is being credited (reduced). The details from this Credit Note are then used to make the official entry in the Sales Return Book.
6. Why can't a business just record returned goods as a negative number in the Sales Book?
Recording returns as negative sales would misrepresent the business's performance. Keeping separate books allows a business to accurately track its total gross sales and, separately, monitor the volume and reasons for sales returns. A high number of returns could indicate problems with product quality or customer satisfaction, which is a crucial insight.
7. If a company sells an old office computer on credit, would this be recorded in the Sales Book?
No, it would not. The Sales Book is used exclusively for recording the credit sale of goods—the items a business normally trades in. An old computer is considered an asset. The sale of an asset on credit is a non-routine transaction and is recorded in the Journal Proper, not the Sales Book.
