In case of merchandise return, the inventory account is increased by the amount of cost of the goods returned, and:

Question

In case of merchandise return, the inventory account is increased by the amount of cost of the goods returned, and:​

Quizplus · Accepted Answer

When merchandise is returned, the inventory account is increased (debited) to reflect that the goods are back in inventory. The estimated returns inventory account is decreased (credited) by the same amount to reflect that there is now less inventory that may be returned in the future. The customer refunds payable account is not affected until the actual refund is processed, at which point it will be credited. Accounts receivable is not affected because the customer has not yet paid for the returned merchandise. Retained earnings is not affected by the return of merchandise.

In Case of Merchandise Return, the Inventory Account Is Increased