SALES RETURN PROCESSES (STUDY OBJECTIVE 3)

It is nearly always the case that a small portion of sales made to customers will ultimately be returned to the seller. A company must have procedures in place for receiving returned goods, crediting the customer's account, and placing the items back in inventory. Exhibit 8-8 is a process map of a sample sales return process. Exhibit 8-9 shows a document flowchart for the sales return processes, and Exhibit 8-10 shows sales return processes in a data flow diagram (DFD).

When customers return goods, the goods are handled by the receiving department. Returned goods are typically accompanied by documentation from the customer, such as a bill of lading and packing slip. The goods should be inspected for possible damage, and a copy of the original sales invoice should confirm the historical sale of the goods. A receiving log is prepared that lists the chronological sequence of all returned items, and a receiving report records the quantity received. A receiving report is a source document completed by personnel in the receiving dock that documents the quantity and condition of items received. If the returned goods are accepted, they are placed back in the proper location in the warehouse and the inventory records are updated to reflect the increase in inventory.

A credit memorandum is prepared to document the return and to adjust the amount of the customer's credit status. A journal of credit memos should be maintained in order to provide a complete listing of all credits issued. Reference to the original sales invoice and approved price list will assure that the credit is issued for the correct amount. Sometimes, a refund check may be issued to the customer. In other cases, the customer's accounts receivable balance will be adjusted for the returned items.