Return Outwards vs Return Inwards
Faulty or wrong goods that the business returns back to suppliers
Debit: Suppliers (Liabilities)
Credit: Return Outwards
Explanation: when you return goods back to suppliers, the amount you owe them reduces as you do not have to pay for the wrong items. You will also have to open a new ledger account for return outwards.
Faulty or wrong goods that the customers return back to the business
Debit: Return Inwards
Credit: Debtors (Assets)
Explanation: when customers return goods to you, the amount they owe you reduces. A new ledger account for return inwards also have to be opened.