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On 31 december 2020 goods sold at a sale price of rs 3000 were lying with customer bittu to whom these goods were sold on sale or return basis were revorded as actual sales since no consent has been received from bittu, you are required to pass journal entries presuming goods were sent on approval at a profit of cost plus 20% present market price is 10% less than cost price?
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On 31 december 2020 goods sold at a sale price of rs 3000 were lying w...
Journal Entries for Goods Sold on Sale or Return Basis

Explanation:
When goods are sold on a sale or return basis, it means that the customer has the option to either keep the goods or return them within a specified time period. Until the customer exercises this option, the sale is not considered final and the goods are not recorded as sales.

In this scenario, goods were sold on a sale or return basis to Bittu for Rs 3000. However, since no consent has been received from Bittu, these goods cannot be recorded as sales. Instead, we need to presume that the goods were sent on approval, which means that Bittu had the option to return the goods.

Profit Margin
We also need to presume that the goods were sold at a profit of cost plus 20%. This means that the cost of the goods was Rs 2500 (since the selling price was Rs 3000) and the profit was Rs 500 (20% of Rs 2500).

Market Price
Finally, we are told that the present market price is 10% less than the cost price. This means that the market price is Rs 2250 (90% of Rs 2500).

Journal Entries
Based on the above assumptions, the journal entries for this scenario would be as follows:

1. Goods sent on approval:

Goods sent on approval Dr. 2500
To Sales (on approval) Cr. 2500

2. Sale recorded as actual sale:

Debtors (Bittu) Dr. 3000
To Sales Cr. 3000

3. Adjustment entry for goods returned:

Sales (on approval) Dr. 2500
To Goods sent on approval Cr. 2500

4. Adjustment entry for profit:

Profit and Loss A/c Dr. 500
To Goods sent on approval Cr. 500

Note: The above entries are based on the assumption that Bittu did not exercise the option to return the goods. If Bittu had returned the goods, the appropriate adjustment entries would need to be made.
Community Answer
On 31 december 2020 goods sold at a sale price of rs 3000 were lying w...
Sales a/c Dr. 3000
To debtors a/c. 3000


Inventory with customer on sales return a/c Dr. 2250
To trading account a/c. 2250
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On 31 december 2020 goods sold at a sale price of rs 3000 were lying with customer bittu to whom these goods were sold on sale or return basis were revorded as actual sales since no consent has been received from bittu, you are required to pass journal entries presuming goods were sent on approval at a profit of cost plus 20% present market price is 10% less than cost price?
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