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RECTIFICATION OF ERROR QUESTION.

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 asked

I want to know that what will be the rectifying entry if we made sales of goods to our customer on approval basis and we record the same in our sales book but no acceptance got from a customer till the end of year

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3 Answers
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 answered

Hi Natasha, Businessman provides many facilities to his customers with a view to increase his sales. One of the facilities is that goods are delivered to the customers with the option to retain or return the same within a specified short period. When a businessman sends goods with such an option it is generally called “Sale or Return”. When a businessman sends goods under “Sale or Return” basis to a cus­tomer, it cannot be treated as sales. Delivery of goods on approval basis implies a change of possession only and not a transfer of ownership unless the specified period expires without return or the customer earlier informs of his approval. Following are the journal entries for the transaction of sale on approval basis. 1. Entry When goods are sold on Sale or Return Basis Customer A/c Dr (invoice price) To Sales A/c 1.At the end of the year when goods are lying with customers and time limit is not expired a. Sales A/c Dr (invoice price) To Customer A/c These goods should be considered as inventories lying with customers and following adjustment entry to be passed. b. Inventories with Customers A/c Dr (Cost Price or Mkt Price whichever is low) To Trading A/c Thanks & Regards

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 answered

Businessman provides many facilities to his customers with a view to increase his sales. One of the facilities is that goods are delivered to the customers with the option to retain or return the same within a specified short period. When a businessman sends goods with such an option it is generally called “Sale or Return”. When a businessman sends goods under “Sale or Return” basis to a cus­tomer, it cannot be treated as sales. Delivery of goods on approval basis implies a change of possession only and not a transfer of ownership unless the specified period expires without return or the customer earlier informs of his approval. Following are the journal entries for the transaction of sale on approval basis. 1. Entry When goods are sold on Sale or Return Basis Customer A/c Dr (invoice price) To Sales A/c 1.At the end of the year when goods are lying with customers and time limit is not expired a. Sales A/c Dr (invoice price) To Customer A/c These goods should be considered as inventories lying with customers and following adjustment entry to be passed. b. Inventories with Customers A/c Dr (Cost Price or Mkt Price whichever is low) To Trading A/c

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Open uri20170510 32134 ivjxpn?1494421728 answered

Hi Natasha, Businessman provides many facilities to his customers with a view to increase his sales. One of the facilities is that goods are delivered to the customers with the option to retain or return the same within a specified short period. When a businessman sends goods with such an option it is generally called “Sale or Return”. When a businessman sends goods under “Sale or Return” basis to a cus­tomer, it cannot be treated as sales. Delivery of goods on approval basis implies a change of possession only and not a transfer of ownership unless the specified period expires without return or the customer earlier informs of his approval. **Following are the journal entries for the transaction of sale on approval basis.** 1. Entry When goods are sold on Sale or Return Basis Customer A/c Dr (invoice price) To Sales A/c 2. At the end of the year when goods are lying with customers and time limit is not expired a. Sales A/c Dr (invoice price) To Customer A/c These goods should be considered as inventories lying with customers and following adjustment entry to be passed. b. Inventories with Customers A/c Dr (Cost Price or Mkt Price whichever is low) To Trading A/c

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