BACHELOR OF BUSINESS ADMINISTRATION

Detailed explanation-1: -Credit allowed to a customer for part of the sales price of merchandise that is not returned, resulting in a decrease in the accounts receivable of the merchandising business, is called a sales allowance.

Detailed explanation-2: -Credit allowed for part of the purchase price of merchandise that is not returned, resulting in a decrease in the customer’s account payable to the vendor, is called a purchases allowance.

Detailed explanation-3: -When merchandise is returned, the sales returns and allowances account is debited to reduce sales, and accounts receivable or cash is credited to refund cash or reduce what is owed by the customer. A second entry must also be made debiting inventory to put the returned items back.

Detailed explanation-4: -When a company pays part or all of a previously recorded vendor invoice, the balance in Accounts Payable will be reduced with a debit entry and Cash will be reduced with a credit entry. Accounts Payable is also debited when a company returns goods to a vendor or when the vendor grants an allowance.

Detailed explanation-5: -When customers are allowed to return merchandise for credit to their accounts, these transactions are recorded in the general journal. The voucher is serially numbered form that identifies the name and address of the payee, the due date, terms, description & invoice amount.