The entry to record the return of merchandise from a customer would include a
A) debit to Sales
B) credit to Sales
C) debit to Customer Refunds Payable
D) debit to Estimated Returns Inventory

Question

Quizplus · Accepted Answer

When merchandise is returned by a customer, the entry should include a debit to Customer Refunds Payable to account for the amount of money that will be refunded to the customer. This entry will reduce the balance of Sales from the original transaction. Option A is incorrect because it suggests increasing Sales, which is not the case with a return. Option B is incorrect for the same reason. Option D is incorrect because Estimated Returns Inventory is a separate account used to estimate the amount of future returns, but it is not used in the actual return transaction.

The Entry to Record the Return of Merchandise from a Customer