How to Adjust a Journal Entry for Estimated Sales Return

Estimated sales return is merchandise you expect customers to send back to you because they're not satisfied. Sales returns must be entered on your accounting journal the day they occur, followed by "Accounts Receivable" and "Cash" entries, as you obviously return the money to--or cancel any payment obligations of--the customers. However, an estimation of the sales return in the journal can prove useful when you have sold your whole stock of a specific product and want to predict your total revenue after receiving a certain amount of products back.

Enter the Estimated Sales Return entry near the day you completed the last sale of a specific product. Write "Estimated Sales Return" on the "Accounts" column of your journal.

Sum up the value of all products you expect customers to return to you. For example, if you expect customers to return 15 toys worth $7 each, do 15 × $7 = $105.

Add the amount on the "Debit" column. Since returned products become part of your inventory once again, they increase your assets value and therefore they a "debit" accounting entry.

Write "Accounts Receivable" on the "Accounts" column, directly below the "Estimated Sales Return" entry. Accounts receivable are payments you expect from customers who have bought from you on credit. Below "Accounts Receivable" on the "Accounts" column, write "Cash."

On the "Credit" column of the "Accounts Receivable" row, enter the value of money owned by customers who have bought the expected-to-be-returned toys on credit, while on the "Credit" column of the "Cash" row, add the amount of cash you earned from selling the expected-to-be-returned toys. For example, if from the 15 toys worth $7 each, 10 customers paid in cash and five customers purchased the products in credit, write "$70" on the "Accounts Receivable" row and "$45" on the "Cash" row. The reason both entries represent credit is because they result in a decrease of your assets.

Distinguish the "Estimated Sales Return," "Accounts Receivable" and "Cash" entries from the other entries of your journal. If you're using spreadsheet software, add borders to these three rows and color their background. If you have a traditional journal, use a ruler to draw borders around the rows and use highlighters to color them. This is a highly important task, as it prevents you from confusing estimations from transactions that have actually occurred.