On January 21,2019,Cressent,Inc.received merchandise from Neptune,Inc.On that date,Cressent found a few of these goods to be damaged.On January 22,Cressent returned the damaged goods to the seller.Such returns will be treated as ________ by Cressent.
A)purchase returns
B)sales returns
C)purchase allowances
D)sales allowances

Question

Quizplus · Accepted Answer

Since Cressent received the merchandise from Neptune, Inc., the return of the damaged goods will be recorded as a purchase return, meaning Cressent is returning the goods back to the seller. This reduces the amount payable to Neptune, Inc. and reflects a decrease in Cressent's inventory. Sale returns would occur if Cressent was returning goods to a customer, and purchase allowances or sales allowances are not applicable in this scenario.