Ruby Gems purchases inventory from Diamond Mining.On 3 September,they received a credit note from Diamond Mining as they had been charged $3.85 rather than $3.58 for each of the 100 items purchased.What entry will Diamond Mining make? Ignore GST.
A)Accounts payable-Ruby Gems 27 Inventory 27
B)Inventory 27 Accounts payable-Ruby Gems 27
C)Sales returns and allowances 27 Accounts receivable-Ruby Gems 27
D)Sales returns and allowances 27 Inventory 27

Question

Quizplus · Accepted Answer

Sales returns and allowances is a contra-revenue account that is used to reduce revenue. When a customer returns merchandise, the seller will issue a credit note to the customer and record the transaction in the sales returns and allowances account. The inventory account is also debited to reflect the decrease in inventory.

Ruby Gems Purchases Inventory from Diamond Mining