Goods sent on sale or return basis

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

22 September 2011 I wanted to know,

1) what is the basic accounting treatment for goods sold on sale or return basis ?
2 ) If goods are approved by debtor before the closer of the books, what would be accounting treatment ?
3) And what would be the accounting treatment if goods are lying with debtor, not approved by debtor before closer of books.

Awaiting for experts' and others' opinion.

Thax.

CA. Nitin Agrawal

CA. Nitin Agrawal (Expert)
Follow

22 September 2011 Reveune should be accounted as per AS-9, Revenue recognition. Acc. to AS-9, goods sold on sale or return basis will be accounted only when following conditions are satisfied:

1. Goods delivered to the customer.
2. All risk and rewards passes to the cust.
3. Goods accept by the customer.
4. There exist no uncertainty regarding
collection of receipts.

So if at the time of books closing the goods not accpt by the customer will be shown as "goods ling with the customer A/c" and will not be treated as sale of goods.

Cheers now

Message likes : 1 times

Querist : Anonymous

Querist : Anonymous (Querist)

22 September 2011 ya sir, dats correct abt, revenue recognition.
bt, wht would be d accounting entries in both cases ??

Upgrade to CAclubindia Pro. Subscribe Now!

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
Follow

23 September 2011 I agree with the expert

Querist : Anonymous

Querist : Anonymous (Querist)

25 September 2011 how do we pass accounting entries for the same ? in those 3 different situations.

CA Pushpendra Gaur

CA Pushpendra Gaur (Expert)
Follow

26 September 2011 Well, the accounting entries would be:-
(1) When goods are sold on Approval basis

Party name Dr
To Goods sold on approval basis A/c

(2) When the goods are approved

Goods sold on approval basis A/c DR
To SAles A/c

(3) When the goods sold is not approved on the closing date

Closing Stock-Goods sold on approval basis A/c DR
To Goods sold on approval basis A/c

(4) transfering the closing stock to Trading & Profit & Loss A/c

Trading / Profit & Loss A/c DR
To Closing Stock-Goods sold on approval basis A/c

I hope you clear write here for any doubt

Querist : Anonymous

Querist : Anonymous (Querist)

26 September 2011 now its fine.
i got the point.
Thank you sir.