Purchases Returns and Allowances Rules

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FOR RECORDING RETURNS AND ALLOWANCES FOR GOODS PURCHASED ON CREDIT

1. If merchandise is returned or a price adjustment is necessary, the buyer should debit Accounts Payable and credit the Purchases Returns and Allowances account.
2. When the returned goods were purchased on credit, and a cash discount for early payment is available, the discount only applies to the price of the goods that are kept, (in addition, discounts are not taken on freight costs).