do your customers sometimes return merchandise that they paid for with cash
well in that case you need to learn how to record cash refunds for sales of merchandise
if you have any questions about this topic you can leave them in the comments section below and i'll
do my best to help you and of course if you feel the video helped you i hope you will click like
and don't forget to subscribe to get updates on new videos that come out all the time when
customers return merchandise the effect on the accounts is the opposite of the sale the quantity
of the items returned will increase because we just got back more items from the customer
the correct document to create when merchandise is returned
from a cash sale is called a refund receipt so what happens when items are returned for cash well
the cash and bank will go down because we just gave back some of our cash to the customer
for the returned items and the sales income will decrease by the sales price of the item because
those items were never really sold if the customer turned around and gave it back to us consequently
the cost of goods sold will also decrease by the amount that we paid when we bought the items for
resale because we just got them back so they weren't sold so cost of goods sold goes down
the only thing that increases is the inventory asset and the inventory asset will increase
because we just received back items that were sold so if we now receive back items from a customer
we have more available for sale in inventory for example
let's imagine on january 7th allen returned two apples from the january third sale receipt
what would be the price of the items returned or the sales price
well we sell the apples for fifty dollars each so a hundred dollars of the sale of the apple
is what's reversed and then what did we pay for the two apples that were returned well we
buy them for ten dollars each so we paid twenty dollars for the two apples that were returned
so what will be the result of this sale return in the trial balance well we have a hundred dollars
less in sales so sales will decrease to thirty four hundred we have twenty dollars less in cost
of goods sold so cost of goods sold decreases to six hundred eighty and inventory actually has
twenty dollars more because we just received back merchandise so that will become two thousand eight
hundred twenty and unfortunately because we had to pay them back a hundred dollars our negative
balance becomes a hundred dollars more negative and goes down to 400 credit so these will be the
numbers in the trial balance after we record our refund receipt and here's the example refund you
must make sure that you put the exact same items on the refund receipt apples that you originally
put on the original sale receipt so january 7th two apples return from allen in the top left
click new and go down below sale receipt to where it says refund receipt the date is january 7th
the customer returning is alan now the item that is being returned are apples and we are returning
two of them so the amount we must refund and where it says refund from you have to choose which bank
or credit card account you're refunding the money from so that's how you fill out a refund receipt
and then when you click save and close you okay you successfully issued a refund to alan it means
that you physically wrote him a check from your handwritten checkbook and you gave it to him
now click ok and notice the results are exactly as what we expected three thousand four hundred
sales of product cost of goods sold six eighty inventory asset twenty eight twenty and cash and
bank decrease to more negative four hundred just to double check click reports inventory valuation
detail and you can see when you go down to the bottom of apple's it says january seventh was a
refund that increased the quantity by two apples and increase the cost to 1220 just for apples you