Sales returns and allowances
In one sentenceThe value of goods returned by customers and the reductions granted to them after the sale because of a defect or delay; they are deducted from sales to arrive at net sales.
Simply put
A return is goods that actually came back to you, and an allowance is a reduction you give the customer to keep the goods despite a minor defect. Both reduce revenue.
They are recorded in a separate account instead of being deducted from sales directly, so you can see their size: a high return rate may point to a problem with quality or with the description. Each of them needs a credit note that reduces the VAT.
Worked example
A home appliance shop sold 100,000 SAR during the month; customers returned appliances worth 4,000 SAR, and it gave a customer a 1,000 SAR reduction for a scratch on an appliance.
Gross sales100,000 SAR
Returns4,000 SAR
Allowances1,000 SAR
Net sales: 100,000 − 4,000 − 1,00095,000 SAR
Formula: Net sales = Gross sales − Returns − Allowances
Don't confuse it with
Purchase returnsPurchase returns are goods you send back to the supplier, so they reduce the cost of your purchases, not your sales.
in FullScreen ERP
The system controls returns and links each return to the original invoice. Sales and POS