What is a sales return and a purchase return, and how are they recorded in the books?

A sales return is goods a customer sends back to you; a purchase return is goods you send back to a supplier. Neither is a fresh sale or purchase, so each is recorded as a reversal of the original transaction rather than by deleting it.

For a sales return, reduce your sales by debiting Sales Returns and crediting the customer's account. For a purchase return, debit the supplier's account and credit Purchase Returns. Both return accounts are shown as deductions from sales and purchases respectively when you prepare the trading account.

Under GST, the return is normally supported by a credit note (for a sales return) or a debit note (for a purchase return), so keep that document with the entry.