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1. Could you please explain to me when the refund happens in term of when we purchase or sell goods?
2. When we purchase the goods but some of them are returned to the supplier due to some reason then if we purchase goods on credit then we debit cash and credit payables?
4. However if we purchase goods on cash then we debit cash and credit refund paid account?
5. Similarly when we sell the goods but some of them are returned to our business for some reasonnthen if we sell goods on credit then we debit cash and credit receivable.
6. However if we sell goods on cash then on refund we debit cash and credit refund received account?
Are they all true?
Refunds are simply a repayment of cash. They are not the same as returns even though the reason for giving a refund may well be because the customer returned goods. A refund might be simply because the customer paid too much by mistake and therefore we repay (i.e. refund) the amount overpaid.
When we receive cash from a customer we debit cash and credit the receivable.
If we refund any of the cash to the customer (for whatever reason) the we credit cash and debit the receivable.
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