Journal Entry for Sales Return [Video]

If a customer returns a product, the company must debit the sales return account (this is a contra-asset and is subtracted from gross sales to obtain net sales for the income statement) and credit cash (if the customer had paid cash for the product) or accounts receivable (if the customer hadn’t yet paid for the product).

Also, if the company uses a perpetual inventory system, the company must debit the inventory account and credit cost of goods sold.
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