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When a business returns merchandise to a vendor, it makes an opposite entry to that of a purchase, but instead of crediting the Purchases account, a credit is made to the Purchase Returns and Allowances account. Purchase Returns and Allowances account is a contra expense under cost of goods sold that keeps track of all merchandise returns the business made. The Purchase Returns and Allowances account would appear on the Income Statement as a reduction in the cost of purchases.
Why would a business want to keep track of returns it makes?
Do you think it would be feasible to allow every person who works at a business to buy and order merchandise? Think about a business like Bed, Bath & Beyond. . . or think about a business you are associated with... please explain.
Initial responses to the conversation prompt should be a minimum of 150 words; responses to other students' posts should be a minimum of 50 words. All posts must meet the originality requirements of the University of Phoenix. Direct copy & paste from resource or outside material will not count toward participation. You may use outside material, however, it must be properly cited and referenced - and the post must be substantively unique to count toward participation (a simple rule is 75% your input / 25% resource material)