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John,
In questions 5 and 6 for chapter 15 in the BPP revision kit they record cash refunds to Credit customers as a debit to receivables. How does that make sense, you credit the cash, sure, but why would debit Receivables increasing the balance with a cash refund? Wouldn’t you debit the Refunds account? Why does this have any effect on the Receivable control account at all?
Thanks,
RachelA cash refund to a customer is a repayment of cash to a customer – maybe, for example, the customer had accidentally paid us twice and therefore we repay the extra money.
When we receive cash from a customer we debit cash and credit receivables. If we then refund (repay) some of that cash we credit cash and debit receivables.
This is explained in our free lecture on control accounts.
(Our free lectures are a complete course for Paper F3 and cover everything needed to be able to pass the exam well.)
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