Definition and Explanation:
Sales returns are also known as returns inwards because they are being returned back to the firm which sold them. It provides the information relating to the value of goods/inventory returned by the customer to whom the inventory has been sold. The inventory of goods may be returned when goods are found defective, in damaged condition or not in accordance with original sample.
Total amount of sales returns is deducted from total sales in the trading section of income statement, thereby giving the figure of net sales in the income statement itself.
Example of Sales Returns or Returns Inwards with Transaction: