Tiger Co.sold merchandise on account to a customer.The customer returned some of that merchandise because it was not satisfactory.What journal entry will Tiger use to record the return?
A) Debit Sales Revenue and credit Inventory
B) Debit Sales Returns & Allowances and credit Cash
C) Debit Sales Revenue and credit Cost of Goods Sold
D)Debit Sales Returns & Allowances and credit Accounts Receivable; and debit Inventory and credit Cost of Goods Sold

Question

Quizplus · Accepted Answer

The journal entry to record the return of merchandise on account would involve debiting Sales Returns & Allowances (to reduce revenue) and crediting Accounts Receivable (to reduce the amount owed by the customer). Additionally, the return would result in an increase in inventory (since the merchandise is being returned back to the company) and a decrease in cost of goods sold (since the cost of the merchandise is being deducted from the company's expenses). Therefore, the entry would also involve debiting Inventory and crediting Cost of Goods Sold. Option D correctly includes both of these transactions in the journal entry.

Tiger CoSold Merchandise on Account to a Customer