A. Debited to returns outward account
B. Credited to returns outwards account
C. Debited to returns inwards account
D. Credited to returns inwards account
Correct Answer: Option B
B. Credited to returns outwards account
Explanation
When merchandise purchased for cash are returned to supplier, we need to record two journal entries. In the first entry, we debit accounts receivable account and credit purchases returns and allowances account (returns outwards would ve credited because goods are going out of the business). This entry is made to recognize the return of merchandise.
