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    hypervy's Avatar
    hypervy Posts: 3, Reputation: 1
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    #1

    Mar 10, 2007, 12:24 PM
    Relationship of sales returns and accounts receivable.
    The following question is on a take-home quiz. I am perplexed!

    Could someone help and explain why one of the following answers is correct?


    A debit to Sales Returns and Allowances and a credit to Accounts Receivable:
    1 Reflects an increase in amount due from a customer.
    2 Recognizes that a customer returned merchandise and/or received an allowance.
    3 Requires a debit memorandum to recognize the customer's return.
    4 Is recorded when a customer takes a discount.
    5 All of the above.

    Thanks:confused:
    CaptainForest's Avatar
    CaptainForest Posts: 3,645, Reputation: 393
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    #2

    Mar 10, 2007, 03:01 PM
    A debit to Sales Returns and Allowances and a credit to Accounts Receivable:

    AR
    Normally when someone owes us, we debit. So if we are crediting it, our AR balance is going down because either we are being paid (cash) or our writing off a delinquent account.

    Sales Returns And Allowances.
    When we debit it, we are increasing the account, which means people are returning goods they bought from us.

    Therefore, the answer is:
    2 Recognizes that a customer returned merchandise and/or received an allowance.
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