Final answer:
When a return is made, inventory levels and cost of goods sold must be adjusted, along with adjusting sales revenue.
Step-by-step explanation:
When a return is made, aside from adjusting sales revenue, a business must also adjust its inventory levels and the cost of goods sold (COGS). Inventory must be increased to reflect the returned items being back in stock. Simultaneously, the COGS needs to be reduced because the sale that generated those costs has been reversed. Additionally, businesses may need to adjust for any sales taxes that would have been collected on the original sale, as this tax liability will usually decrease with a return.