In the Profit & Loss statements Sales returns and Purchases returns are separately identified from the recorde?

College B


its regarding accounting
I am sorry early my question was cut out due to some faults the full question I wanted to ask is below:
In the Profit & Loss statements Sales returns and Purchases returns are separately identified from the recorded sales and purchases. Rationalize the need for such separate classification instead of netting of Returns Inwards against Gross Sales and Returns Outwards against Gross Purchases.

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Tags: Accounting, Profit Loss

This entry was posted on Thursday, June 25th, 2009 at 11:32 am and is filed under Business tips. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

3 Responses to “In the Profit & Loss statements Sales returns and Purchases returns are separately identified from the recorde?”

1. SuzeY Says:
   June 28th, 2009 at 1:50 pm

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   I’m not sure exactly what you’re asking. Are you asking why the purchases and sales returns and allowance accounts are shown as a separate grouping on an income statement? If that’s the question you’re asking, the reason is because those particular items are part of what is considered “Cost of Goods Sold”. Income (revenues) minus Cost of Goods Sold = Gross Profit. Gross Profit can have significance from a management standpoint.

2. essie rosen Says:
   June 30th, 2009 at 11:24 pm

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   these are shown separately on your P @ L statement

3. rehman vohra Says:
   July 4th, 2009 at 2:53 am

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   The basic reason for separate disclosure of sales and purchase returns is to assist management to what extent their purchases and sales are subject to return so that it can identify the causes leading to these returns. The returns are usually due to reasons such as incorrect specification, incorrect quality, bad packaging resulting in damages to product.

   You should remember that the accounting information must help the user to to take rational economic decisions.