Goods Sent on Sale or Return Basis

Goods Sent on Sale or Return Basis

When goods are delivered to a customer on condition that if goods are not approved within a particular period the customer can return the goods. Such a type of sale is called as Goods on sale or return basis.

Auditors Duty

The auditor should vouch sale on return basis by considering the following points:

1.        Auditor should verify that a separate sale or return journal with necessary columns for sale price of goods, value of goods returned and retained should be maintained.

2.  Auditor should vouch the goods on sale-or-return journal with invoices, correspondences with the client or other documentary evidences available with the client.

3.  The auditor should ensure that goods sold on approval should not be treated as complete sale unless the customer approves the sale.

4.  He should check that until the goods are approved it should be shown as goods with customers in closing stock in Balance Sheet. If this is not done, the profit of the concern will be inflated and will not show the correct financial position.

Vouching of Goods Sent on Sale or Return Basis

Auditor should vouch the transaction in the following manner:

1. Verify entries in the Goods sent on Sale Day Book with respect to date, invoice number, name of customer and amount at which goods are sent for sale.

2. Verify entries in Goods on Return Inward Book with regard to date and value of goods returned and retained.

3. Verify entries in Goods on Sale or Return Account with regard to date and amount of goods returned and retained.