Accounting Principles and Practices

 In bookkeeping and accounting, a ledger is a book (or record) for collecting historical transaction data from a journal and organizing entries by account. The ledger provides the transaction history and current balance in each accounting system account, throughout the accounting period.

The customer may return the goods. 

Thus, goods sold that are returned by the customer or buyer, are recorded in the Sales Return Book. 

The Credit Note contains the name of the customer, details of goods returned and reason thereof. Each Credit Note is dated and serially numbered.

Profit on sale of furniture account is a nominal account the golden rule regarding which says “ All expenses and losses should be debited and all income and gains should be credited” as we are earning income from selling we have to credit this account.

Cash A/c Dr.

To Sales A/c.

The total of the Purchases Return Book represents goods returned to suppliers, which reduces purchases; therefore, it is credited to the Purchases Returns Account.

Since the goods are at the buyer's risk, the sale is considered complete, and the revenue is recognized. The goods are no longer part of the seller's inventory.

Journalizing is the process of recording a business transaction in the accounting records. This activity only applies to the double-entry bookkeeping system.  

This calls for the identification of the general ledger accounts that will be altered as a result of the transaction.

A supplier when an order is received, this may be due to poor quality, inaccurate quantity, untimely delivery or other reasons. 

Purchase returns are also called returns outward and an appropriate purchase returns/returns outward book is maintained.

All returns are primarily recorded in the purchase returns book unless the returns are not that frequent, in which case they are recorded in the journal.

Accounts Receivable (AR) is the proceeds or payment which the company will receive from its customers who have purchased its goods & services on credit. Usually the credit period is short ranging from few days to months or in some cases maybe a year.

Journalizing is the process of recording financial transactions in the journal or specialized journals.

The Sales Return Journal is the specialized book used to record goods returned by customers.

Specialized journals like the Purchase Day Book are only for credit purchases of stock. Credit purchases of assets like plant and machinery must be recorded in the General Journal.

The Purchase Book is only for credit purchases of goods (stock). Credit purchases of assets are recorded in the Journal Proper.

Debit - Loan Account

When the goods sold are return back to the vendor it is recorded in sales return book. buyer may return the goods due to poor quality of goods or inaccurate quantity or other reasons etc. It is also called as return inwards. All returns are primarily recorded in sales return book unless the returns are not the frequent, in which case they are recorded in the Journal. After updating transactions in sales return book, the total of the items is transferred to ledger in an account called the "Sales Returns A/c".

When the business transactions take place, the first step is to record the same in the books of original entry or subsidiary books or books of prime or journal. Thus, journal is a simple book of accounts in which all the business transactions are originally recorded in chronological order and from which they are posted to the ledger accounts at any convenient time. Journalisisng refers to the act of recording each transaction in the journal and the form in which its is recorded, is known as a journal entry.