Which of the following is the correct journal entry to record a credit note issued to a customer for goods returned?
Ans. Dr. Sales returns
Initially I circled
Dr. Sales returns
Cr. Trade Receivables
But then I came to know that the answer is the first one. Is it because it says “issued” in the question or is the answer wrong?
Either could be right. It depends on whether the customer was a cash customer who would be given cash, or a credit customer who would have his/her account credited.
Even cash-based businesses issue invoices and credit notes to document sales and returns.
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