When a customer returns goods, the journal entry for a merchandiser using the perpetual inventory system will include a debit to Sales Returns and Allowances and a debit to Inventory.

Question

Quizplus · Accepted Answer

In the perpetual inventory system, when a customer returns goods, the journal entry will include a debit to Sales Returns and Allowances (a contra revenue account) to reduce the revenue previously recognized and a debit to Inventory (an asset account) to increase the inventory on hand. The credit entry will be to Accounts Receivable (if the customer is returning goods on credit) or Cash (if the customer is returning goods for a refund).

When a Customer Returns Goods, the Journal Entry for a Merchandiser