When goods are returned, the seller reduces the account receivable and increases the merchandise inventory accounts reported on the statement of financial position.

Question

Quizplus · Accepted Answer

When goods are returned, the seller reduces the account receivable (since they no longer have the right to receive payment for that sale) and increases the merchandise inventory accounts (since they are taking back the inventory that was sold). This adjustment is necessary to accurately reflect the financial position of the business.

When Goods Are Returned, the Seller Reduces the Account Receivable