Tag: functions, advantages, objects and importance of journal

When the goods sold are return back to the vendor it is recorded in sales return book. buyer may return the goods due to poor quality of goods or inaccurate quantity or other reasons etc. It is also called as return inwards. All returns are primarily recorded in sales return book unless the returns are not the frequent, in which case they are recorded in the Journal. After updating transactions in sales return book, the total of the items is transferred to ledger in an account called the "Sales Returns A/c".

When the business transactions take place, the first step is to record the same in the books of original entry or subsidiary books or books of prime or journal. Thus, journal is a simple book of accounts in which all the business transactions are originally recorded in chronological order and from which they are posted to the ledger accounts at any convenient time. Journalisisng refers to the act of recording each transaction in the journal and the form in which its is recorded, is known as a journal entry.

Purchase return day book is a subsidiary book in which all the credit  purchases returns are recorded. It has 05 columns. At the end of a specific period, the total of purchase return day book is posted to credit side of purchase a/c in ledger.

When goods are received back from customer which are sold on credit, a note is prepared and the original copy of the same is sent to the party that  returned the goods, i.e. the customer. This note is termed as credit note because the customer from whom the goods are received back, his/her account is credited with the amount written in the note and on the basis of  duplicate copy of credit note the transaction is recorded in the sales return books by the supplier.

Return of goods, purchased on credit is recorded in the purchase return book. Purchases book shows a debit balance, so the purchases return book will definitely show a credit balance, because purchases return book will definitely show a credit balance, because purchase return is entirely reverse to purchase.  

Net benefit cost ratio takes into consideration the time value of money.
Net benefit cost ratio  = NPV /
Investment = BCR-1
When NBCR>1 (BCR>1), the project is accepted. Therefore, a project with NBCR = 0.75 will be accepted. This criterion cannot be used when investment outlay is spread over more than one period.

The credit note received from supplier shows the goods returned and the amounts involved. The purchase returns book also known as returns outward book and is used to record the debit notes. Goods returned to supplier denotes purchase return to supplier hence it is recorded in return outward account.