Return of Sold Merchandise: Cash Refunds and Accounts Receivable

4. Return of sold merchandise • The seller: • Returns cash to the buyer or • Reduces the buyer's accounts receivable. Perpetual inventory systemperiodic Dr sales returns and allowancesCr cash or a/r (to record return of goods)'(why not sales but sales returns and allowances? To keep track of specifically how much merch has been returned) Dr sales returns and allowances Cr cash or a/r (to record return of goods) Dr merchandise inventoryCr cost of goods sold (to record cost of goods returned) (this is only when the goods are still good and will be returned to the inventory)(if not this entry doesnt happen) No entry 5. Discounts Prepetual and periodic the same Debit cash Debit sales discountsc Credit acc recieavable Cost of goods sold is considered an expense