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Dear teachers,
Please, explain the phrases of “credits for goods returned by customers” and “cash refunds” to me and how should I account them?
Thanks in advance.‘Credit for goods returned’ is reducing the amount owed by a customer because they have returned the goods. When we sold the goods we will have debited receivables and credited sales. If they return the goods. they no longer owe us the money, so we credit receivables and debit sales.
A cash refund is paying cash back to a customer. For example, a customer may have paid more than they owed us by mistake. When we received the cash we will have debited cash and credited receivables. When we repay (refund) the amount they overpaid we credit cash and debit receivables.
I explain both of these in my free lectures. The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
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