Every now and then it may happen that you have to credit your sales – either returned goods, improper amounts on the invoice etc. There may be numerous reasons, but fact of the matter is, that sometimes you do have to do it.

Now whilst in essence it’s not that difficult, you just recognize an invoice with a negative figure and add it to proper client account, something you do have to be watchful with however is the period which revenue you’re decreasing. In the middle of the period it’s not a question, but if it’s prior period sales (and especially if it happens in January that you have to credit December sales), the credit should also be put into the period the sale it relates to was made.

Now of course, if it’s not a material amount, you can just leave it into the current period, but bearing in mind the fact that your sales in both period are wrongly stated, it always makes sense to adjust them properly.

So, always ask yourself in which period this sale was first recognized in. Was it current period or any prior one? If the latter, then based on the amount, it may make more sense to actually go back and credit the prior period.