Question

auditor should verify whether returns outward account is deducted from​

Answer 1

Answer:

The Auditor should verify the goods returned for the following reasons:  

Explanation:

The Auditor should verify the goods returned for the following reasons:  

• Debit reduction in the revenue from the total amount i.e. calculated from the total credit back to the customer. Also if the reserve for returns is already set then it is known as a reduction of the reserve.
• Credit reduction in the revenue of the receivable account may be for unpaid invoices or for open credit.

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Answer 2

Note: The correct question must be provided with following options-

Auditor should verify whether "Returns Outward Account" is deducted from

A) Gross sales

B) Gross purchases

C) Interest

D) Direct Expenses​

For the following reasons, the Auditor should verify the goods returned:

• Deduction in revenue from total amount, calculated from total credit back to the customer.
• Also, if the reserve for returns has already been established, it is referred to as a reserve reduction.
• Credit reductions in the receivable account's revenue may be for unpaid invoices or for open credit.

However, gross purchases are deducted from return outwards in the trial balance.

Return outward is also referred to as purchase return.

As a result, they will have to be cut from gross purchases.

Hence,option B is correct.

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