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30 April, 20:53

On Jan 5, a customer returned merchandise that had been purchased earlier on credit. The original sale was for $500, and the cost to the seller was $150. Demonstrate the required journal entry to record the return on the books of the seller, assuming the goods can be sold to another customer.

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  1. 30 April, 21:44
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    Answer: The journal entry for this returned purchase is as follows;

    Dr. Sales Returns and Allowances $500

    Dr. Merchandise Inventory $150

    Cr. Accounts Receivable $500

    Cr. COGS $150

    Explanation:

    The sales account is the revenue of the good/item purchased. The merchandise inventory is a type of an assets. The journal entry is important to a business so that they can track expenses incurred for the returned item. A new entry will need to be made when a new sale is made.
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