Hi.

I purchase goods from a supplier. I then sold some of the goods to a customer. The customer sent some back because they were damaged. I replaced them. Later I tried to return them to the supplier, but they didn't accept responsibility. How do I journalise this?

Should I debit (increase) Cost of goods sold, and credit (reduce) inventory in the first case? (as essentially the Sale hasn't changed at all... just the extra inventory).

Or should I include the Sales Returns and Allowances account somewhere? (though this doesn't make sense, as the sale is still in effect.

Then when I attempt to return to the purchaser, because he doesn't accept responsibility, I can't reduce inventory (if I've already done that)... would there possibly be a separate "damaged goods" account, that I'd need to debit in the first part, to record the returned goods? (but then what would I offset that with?).

It's confusing me no end.

Thanks in advance