A debit note received from a customer for Rs. 40,000 had been debited ...
Debit Note and its Meaning
A debit note is a document issued by a purchaser to a supplier, indicating that the purchaser wishes to debit the supplier's account with the amount of the note. It is usually issued in case of goods returned, overcharges, or incorrect invoicing by the supplier.
Debit Note Received from a Customer
In this case, the customer has issued a debit note to the supplier, indicating that they wish to debit the supplier's account with Rs. 40,000. This could be due to various reasons, such as goods returned, overcharges, or incorrect invoicing by the supplier.
Debit Note Debited to Customer and Credited to Returned Inwards Account
However, the supplier has mistakenly debited the customer's account with Rs. 40,000 and credited the Returned Inwards Account with the same amount. This means that the supplier has recorded the transaction incorrectly in their accounting records.
The Returned Inwards Account is used to record goods returned by customers. It is a contra account to Sales, which means that it reduces the balance of Sales. When goods are returned by customers, they are recorded in the Returned Inwards Account, which reduces the balance of Sales.
Correcting the Error
To correct the error, the supplier needs to reverse the entry that was made in error and record the correct entry. The correct entry would be to debit the Returned Inwards Account and credit the customer's account with Rs. 40,000.
The journal entry to correct the error would be as follows:
Debit: Customer's Account - Rs. 40,000
Credit: Returned Inwards Account - Rs. 40,000
By making this correction, the supplier's accounting records will be accurate, and the customer's account will be correctly debited with Rs. 40,000.
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