When a credit customer returns merchandise,a seller that uses the perpetual system would debit Sales Returns and Allowances and credit Accounts Receivable and also debit Merchandise Inventory and credit Cost of Goods Sold.

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When a credit customer returns merchandise, the perpetual system requires the seller to debit Sales Returns and Allowances and credit Accounts Receivable. In addition, the seller must adjust the inventory accounts to reflect the return: debit Merchandise Inventory (to reflect the increase in inventory) and credit Cost of Goods Sold (to reflect the decrease in inventory).

When a Credit Customer Returns Merchandise,a Seller That Uses the Perpetual