A retailer returns 400 worth of inventory to a manufacturer...

A retailer returns $\$ 400$ worth of inventory to a manufacturer and receives a full refund. What accounts recognize this return before the retailer remits payment to the manufacturer? A. accounts payable, merchandise inventory B. accounts payable, cash C. cash, merchandise inventory D. merchandise inventory, cost of goods sold

A retailer returns $\$ 400$ worth of inventory to a manufacturer and receives a full refund. What accounts recognize this return before the retailer remits payment to the manufacturer?
A. accounts payable, merchandise inventory
B. accounts payable, cash
C. cash, merchandise inventory
D. merchandise inventory, cost of goods sold

Key Concepts

Accounts Payable

This is a liability account that records amounts owed to suppliers for goods purchased on credit. In the event of a return to the supplier, the liability is reduced, reflecting that the obligation to pay for the goods has decreased.

Merchandise Inventory

This asset account records the cost of goods purchased for resale. When inventory is returned to a supplier, the account is decreased to reverse the original purchase entry, accurately reflecting the current inventory on hand.

Transcript

00:01 Okay, so we are going to understand the meaning of credit transaction, okay? and we will also understand that what are the related aspects of such transaction? it is the transaction that involves transfer of goods and services to customer, but the payment will be made later point in time.

01:22 Okay.

01:23 Now what does that mean? that the delivery of goods and services will take place in first place.

01:30 Okay? like the supplier will deliver goods and services to customer.

01:35 However, the customer will say that i will pay you at later point in time.

01:43 Now what happened? let's suppose there is mr.

01:47 A.

01:49 Who is a business owner okay who is a business owner however there is mr mr x who is a supplier so in in almost every industry in almost every industry except in case of service industry there is the the transaction method on basis of credit is very very popular like let's say suppose mr x will the goods so we are drawing example however to make understand the solution okay so mr x will supply goods goods of let's say hundred dollars now what happened mr a will say to mr x that i will pay you at later point in time okay if that will happen now now after that mr a said what happened that out of those goods let's say out of hundred units okay out of hundred units ten units found to be defective by mr.

03:13 A okay ten units found to be defective now in order to record that effect in order to record that effect what will happen mr.

03:31 A will mr.

03:36 A will give effect to two types of accounts.

03:40 Okay.

03:42 So first type of account will be accounts payable.

03:48 Okay.

03:49 It will be accounts payable...

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