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Home Accounting Dictionary Letter S Sale or Return Basis Definition
 
 

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Sale or Return Basis Definition:

Goods passed to a customer on the understanding that a sale will not occur until they are paid for. As a result, these goods continue to belong to the seller.

The effect of an arrangement of this type is that there really is not a liability to pay the seller until the goods have been sold on to a customer of the buyer. If there is no liability, the buyer cannot recognize the existence of the goods held on sale or return basis when the buyer's financial statements are being prepared at the end of the accounting period. As a result, if goods on sale or return are held by the buyer at the stocktaking date, they should not be included in the buyer's stock valuation, nor in the figure for purchases.

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