Maintaining journal for purchased returns- Get all the details here


There are a lot of people who are running their businesses and use different tools for Accounting. To keep the business running smoothly a lot of things are to be kept under control. The most important thing here is journal entry. People in the field of Accounting must know about the things related to journal entry and all. Simple situations are dealt by everyone easily.

purchase return journal entry

The thing here is that there are situations other than the journal entries of just credit and debit as well which are needed to be taken care of as well. So these are important part of Journal entries as well.

Purchased returns

So we are going to talk about something very specific in this article. We are going to talk about purchase return journal entry. This is important aspect of Accounting as well. There are a lot of situations and times when a merchandise or a company sells some time, it turns to be defective. So you can take the product back but it is clearly not enough. This is not how things work in big companies.

There is need to put these purchase return things under something very specific column or journal. So we put these items in journal as sales return entry. These things are really needed to be taken care of in the best possible way. You just do not want to ruin your systematic setup of journal just because of purchase return entry thing. So these entries are also maintained in a best possible way.

It is clear that maintaining purchase return journal entry column in the journal will keep things intact for the merchandise. There are no risks of conflicts with the customers and other people who are managing the accounting stuff.

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Journal entry

So we know if the merchandise purchased are not according to specification or they are defective, buyer may return them to the seller and even ask for an allowance as well. To record such returns and allowances cases, an account called as purchases returns and allowances is used in the books of the buyer. These are also termed as returns outwards.

The journal entries for these merchandise are to be kept. But the journal entries for the return of merchandise purchase for cash and merchandise purchased on Account are different.

Return of merchandise purchased for cash

When merchandise purchased for cash ard returned to supplier we need to recidd two journal entries. In first entry we debit accounts receivable account and credit purchases returns and allowances Account. This entry is made to recognise the return of merchandise.

Now in the second entry we debit cash account and credit accounts receivable account. This entry is made when a refund is received from supplier for merchandise returned to him.

Let’s say A merchants purchases merchandise for 1500 dollars from B traders. Now serious defects are found in the merchandise by A trader and he or she returns the merchandise to B traders in same day. Z traders returns the full amount of cash to Y traders.

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Now it is required to make journal entry in the book of Y merchants.

  • To record the purchase of merchandise from Z traders.
  • To record the returns outwards.
  • To record the receipt of refund of cash for goods returned to Z traders.

Return of merchandise purchased on Account

When merchandise purchased on Account are returned to supplier, we debit accounts payable Account and credit purchases returns and allowances Account.

This is how journal entries for purchased returns are kept the businesses for the smooth process of everything.