When a credit customer returns merchandise to the seller, under a perpetual inventory system, the seller would debit Sales Returns and Allowances and credit Accounts Receivable and also debit Merchandise Inventory and credit Cost of Goods Sold.

Question

Quizplus · Accepted Answer

This is correct according to the generally accepted accounting principles (GAAP) under a perpetual inventory system. Sales Returns and Allowances is debited to reverse the original sale and reduce accounts receivable, while Merchandise Inventory is debited and Cost of Goods Sold is credited to adjust inventory levels and cost of goods sold.

When a Credit Customer Returns Merchandise to the Seller, Under