Question

Which statement is true for the seller?

a. The Sales Discounts account is debited for defective merchandise returned by a customer.

b. The Sales Discounts account is credited for defective merchandise returned by a customer.

c. The Sales Returns and Allowances account is credited for defective merchandise returned by a customer.

d. The Sales Returns and Allowances account is debited for defective merchandise returned by a customer.

Answer 1

The answer is: D) The Sales Returns and Allowances account is debited for defective merchandise returned by a customer.

Step-by-step explanation:

Returned defective merchandise should be recorded under the Sales Returns and Allowances account. This is a contra revenue account which includes all the merchandise returned by the clients and any discounts made to clients that received defective merchandise but didn't return it.

• Dr Sales Returns and Allowances
• Cr Cash or Accounts Receivable