Sales returned next year

llllVICTORllll (Internal Auditor) (511 Points)

20 August 2012  

Hi All

 

This was a question asked to me earlier this year in an interview, and i still do not know 100% what the answer should exactly be

 

So here goes the question

 

Keeping matching concept of accounting in Mind

 

IF a company does a sale on say 29/3/2012, and the same item has been returned on 24/4/2012, to which year the sale return be accounted.

2011-12? if so then the date of sales return being next year will cause problem related to credit note the debtor will issue and also transaction cannot be accounted before it happens... right?

or

2012-13? if this then the matching concept of acccounting goes wrong, as it relates to transaction of previous year

 

or can we show the sales return as a prior period item, if so, then for a big company the single sales return might be too immaterial to show as prior period item in P &L

 

So what should be the treatment, explain with reason