When a Customer Returns Merchandise Purchased on Credit, the Retailer

question 38

Multiple Choice

When a customer returns merchandise purchased on credit, the retailer debits

• A)Sales and credits Accounts Receivable.
• B)Sales Returns and Allowances and credits Accounts Receivable.
• C)Accounts Receivable and credits a contra-revenue account.
• D)Cash and credits Sales Returns and Allowances.

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Definitions:

Profit

The financial gain that is derived from the difference between the amount earned from goods sold or services provided and the cost of production or providing these services.

Consolidation Adjustment

A process in financial accounting where adjustments are made to present a group of companies as a single economic entity in consolidated financial statements.

Intragroup Transactions

Transactions that occur between entities within the same group of companies, often for the purpose of internal record-keeping or consolidation purposes.

NCI

Stands for Non-Controlling Interest, which represents the portion of equity in a subsidiary not attributable to the parent company.