A. Credit side of the returns outwards book
B. Debit side of the returns outwards account
C. Debit side of the purchases returns book
D. Credit side of the returns outwards account
Correct Answer: Option D
D. Credit side of the returns outwards account
Explanation
When merchandise (goods) purchased for cash is returned to the supplier, we need to record two journal entries. In the first entry, we debit accounts receivable account and credit purchases returns and allowances account. This entry is made to recognize the return of merchandise. In the second entry we debit cash account and credit accounts receivable account. This entry is made when a refund is received from the supplier for merchandise returned to him.
