Question

Acme Enterprises, which uses a perpetual inventory system, recorded a debit to Sales Returns & Allowances and a credit to Accounts Receivable. (No other accounts were affected.) What business event must have taken place?

Answer 1

Acme Enterprises recorded a return of goods with a debit to Sales Returns & Allowances and a credit to Accounts Receivable, indicating a customer returned products from a sale.

Step-by-step explanation:

If Acme Enterprises, which uses a perpetual inventory system, recorded a debit to Sales Returns & Allowances and a credit to Accounts Receivable, it indicates that a business event of a sales return must have taken place. This accounting entry signifies that a customer returned goods, and the company has acknowledged the return by reducing the sales revenue through Sales Returns & Allowances and reducing the customer's obligation to pay by crediting Accounts Receivable. In a perpetual inventory system, inventory accounts would typically be adjusted as well, but since the question specifies that no other accounts were affected, we assume that the inventory adjustment has been omitted or that it could be handled in a separate transaction.