Merchandise purchased by Dawes Pty Ltd on credit for $1500 was returned,as it had been damaged in transit.The transaction would be recorded by Dawes Pty Ltd as:

Question

Quizplus · Accepted Answer

When merchandise is returned due to damage, it would be recorded as a return inwards in the books of the buyer. Therefore, Dawes Pty Ltd would debit Accounts payable (to reduce the accounts payable balance) and credit Inventory (to increase the inventory balance). Option A is incorrect as it shows recording of return outwards, which is not appropriate for this scenario. Option C and D are also incorrect as they show the recording of the cost of goods sold, which is not appropriate when the goods are returned.

Merchandise Purchased by Dawes Pty Ltd on Credit for $1500