The major differences between a return inward and a return outward are as follows −

Return inward

  • Return inward is defined as the seller returning the goods back due to various reasons (defective, incorrect goods etc.)
  • Return inward transactions starts, when the seller receives sold goods back.
  • It occurs next to return outwards.
  • The journal entry for return inward is as follows −
Return inwards A/c
      To customers Ac
  • It is recorded in seller books of accounts.
  • Impact − Reduces seller sales and creates liability.
  • In financial statements, it is disclosed in reduction from sales in the seller trading account.
  • The consequences are goods resale or refund for sale.
  • The format of return inward is as follows −
DateName of customerCredit noteFolioAmount


Return outward

  • Return outward is defined as, goods returned back by buyer to seller.
  • Return outward transactions start, when the buyer returns the purchased goods.
  • Occurs before returning inward.
  • The journal entry is as follows −
Suppliers A/c
      To Return outwards A/c
  • Recorded in buyers books of accounts.
  • Impact − Reduces buyer purchases, creates assets.
  • Disclosed as reduction in buyer trading account in financial statements.
  • The consequence is that it pays an amount or exchange (new goods)
  • The format is as follows −
DateName of customerDebit noteFolioAmount



Published on 13-Jul-2021 11:52:05

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