How to Handle Goods Return in Accounting
What happens when goods worth £800 are returned to Quiet?
a. Quiet's account in the purchase ledger is credited with £800.
b. Quiet's account in the purchase ledger is debited with £800.
c. Quiet's account in the sales ledger is debited with £800.
d. Quiet's account in the sales day book is debited with £800.
Answer:
The correct answer is: a. Quiet's account in the purchase ledger is credited with £800.
When goods worth £800 are returned to Quiet, the correct accounting entry would be to credit Quiet's account in the purchase ledger with £800. Here's a step-by-step explanation:
- In this scenario, Quiet is receiving goods back, which means they are returning the items they previously purchased. This falls under the category of "purchase returns" or "returns outwards".
- To record this transaction, we need to credit Quiet's account in the purchase ledger. Crediting an account means to decrease its balance.
- By crediting Quiet's account in the purchase ledger with £800, we are reducing the amount they owe for the returned goods.
So, the correct answer is: a. Quiet's account in the purchase ledger is credited with £800.