A customer returns 870 worth of merchandise and receives a...

A customer returns $\$ 870$ worth of merchandise and receives a full refund. What accounts recognize this sales return (disregarding the merchandise condition entry) if the return occurs before the customer remits payment to the retailer? A. accounts receivable, sales returns and allowances B. accounts receivable, cash C. sales returns and allowances, merchandise inventory D. accounts receivable, cost of goods sold

A customer returns $\$ 870$ worth of merchandise and receives a full refund. What accounts recognize this sales return (disregarding the merchandise condition entry) if the return occurs before the customer
remits payment to the retailer?
A. accounts receivable, sales returns and allowances
B. accounts receivable, cash
C. sales returns and allowances, merchandise inventory
D. accounts receivable, cost of goods sold

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Key Concepts

Accounts Receivable

Accounts receivable represents amounts owed to a company by its customers on credit sales. When a customer makes a purchase on credit, the receivable is recorded as an asset, and any returns or adjustments that occur before payment impacts this balance by reducing the expected cash inflows.

Sales Returns and Allowances

Sales returns and allowances is a contra revenue account used to record the reduction in revenue due to customer returns or allowances granted by the company. This account helps to accurately reflect net sales by offsetting gross sales amounts and providing insight into the quality of sales transactions and customer satisfaction.

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