When merchandise that was sold on account is returned, which accounts are affected? a. Cash, accounts receivable, cost of goods sold, and customer refunds payable b. Customer refunds payable, accounts receivable, purchases, and estimated returns inventory c. Customer refunds payable, accounts receivable, merchandise inventory, and estimated returns inventory d. Customer refunds payable, accounts receivable, purchases, and merchandise inventory

Question

Business

Zoie Bryan

5 January, 18:34

When merchandise that was sold on account is returned, which accounts are affected? a. Cash, accounts receivable, cost of goods sold, and customer refunds payable b. Customer refunds payable, accounts receivable, purchases, and estimated returns inventory c. Customer refunds payable, accounts receivable, merchandise inventory, and estimated returns inventory d. Customer refunds payable, accounts receivable, purchases, and merchandise inventory

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Answers (1)

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Jolly · Answer 1

c. Customer refunds payable, accounts receivable, merchandise inventory, and estimated returns inventory

Explanation:

When merchandise that was sold on account is returned, the accounts that are affected are:

Accounts Receivable which is credited to reduce the amount the customer is owing OR that is receivable from customer.

Returns Inventory is debited to reduce sales amount and A second entry must also be made to debit merchandise inventory to add back the returned items to stock.