Exam layout
Returns day books format
Returns day books record goods sent back using credit notes. Returns inwards come from customers and returns outwards go to suppliers, each in its own book.
The standard format
- Returns inwards day book: goods returned by customers
- Returns outwards day book: goods returned to suppliers
- Each entry taken from a credit note
- Totals posted to returns inwards and returns outwards
- Individual entries posted to the personal accounts
Filled example
| Credit note 12, customer A | RM 120 |
| Credit note 13, customer B | RM 80 |
| Total returns inwards | RM 200 |
Notes
- Returns inwards reduce sales; returns outwards reduce purchases.
- Each is supported by a credit note, not an invoice.
- The two must not be mixed, as they sit on opposite sides of the ledger.
Building and reading this format
There are two returns day books. The returns inwards day book (also called the sales returns day book) lists goods that credit customers send back to you. The returns outwards day book (the purchases returns day book) lists goods you send back to your credit suppliers.
Goods coming back in reduce sales.
Goods going back out reduce purchases. That is why the books are kept apart. Both are books of prime entry, so neither is part of the double entry itself.
The columns are the date, the name of the other party, the reference document, and the value returned. The reference is a credit note, not an invoice, because a credit note is the document that formally reduces an amount owed. In the returns inwards book it is the credit note you issued to your customer.
In the returns outwards book it is the credit note you received from your supplier. Writing an invoice number where a credit note belongs shows a misunderstanding of the documents.
To build the returns inwards day book, take each credit note you have issued. Record the date, the customer's name, the credit note number and the value of goods returned.
Suppose on 12 August a customer, S. Devi, returns faulty goods worth RM150 that she bought on credit. Enter the date, her name, the credit note reference and RM150.
At period end, total the value column. Post the total to the debit side of the returns inwards account in the general ledger. Post each individual amount to the credit side of the customer's account, which reduces what they owe.
The returns outwards day book is built the same way from credit notes received. Post its total to the credit side of the returns outwards account.
Post each amount to the debit side of the supplier's account, which reduces what you owe. The totals later feed the income statement, where returns inwards are deducted from sales and returns outwards from purchases.
Marks are mostly lost by mixing up the two books. Ask one question: whose goods moved, and in which direction? Inwards means goods coming back into your business from customers.
Outwards means goods going back out to suppliers. Posting a total to the wrong side is another common error. Returns inwards is a debit and returns outwards is a credit.
Using invoice references instead of credit note references, leaving out the period total, and giving the book debit and credit sides like a T-account also lose marks. Keep the folio column filled so each return can be traced to its ledger posting.
If you often post returns to the wrong side, one of our teachers can run through the sales and purchases versions with you until the direction becomes clear. Book a trial class
Related how-to
These formats are standard accounting practice with our own figures. Check your board's exact requirements on the exam boards page.
Practise the returns day books
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