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