When a buyer returns merchandise purchased for cash, the buyer may record the transaction using the following entry

Question

Quizplus · Accepted Answer

When a buyer returns merchandise purchased for cash, the cash account is credited and the merchandise inventory account is debited to reflect the increase in merchandise returned to the seller. Therefore, the correct entry is to debit Cash and credit Merchandise Inventory. Option A is incorrect because Merchandise Inventory should be debited instead of Cash. Option C is incorrect because Sales Returns and Allowances is a contra-revenue account that is credited when a buyer returns merchandise for credit, not for cash. Option D is incorrect because Sales Returns and Allowances should be credited when a buyer returns merchandise for credit, not for cash.

When a Buyer Returns Merchandise Purchased for Cash, the Buyer