How to Handle Goods Return in Accounting

What happens when goods worth £800 are returned to Quiet?

a. Quiet's account in the purchase ledger is credited with £800.

b. Quiet's account in the purchase ledger is debited with £800.

c. Quiet's account in the sales ledger is debited with £800.

d. Quiet's account in the sales day book is debited with £800.

Answer:

The correct answer is: a. Quiet's account in the purchase ledger is credited with £800.

When goods worth £800 are returned to Quiet, the correct accounting entry would be to credit Quiet's account in the purchase ledger with £800. Here's a step-by-step explanation:

1. In this scenario, Quiet is receiving goods back, which means they are returning the items they previously purchased. This falls under the category of "purchase returns" or "returns outwards".
2. To record this transaction, we need to credit Quiet's account in the purchase ledger. Crediting an account means to decrease its balance.
3. By crediting Quiet's account in the purchase ledger with £800, we are reducing the amount they owe for the returned goods.

So, the correct answer is: a. Quiet's account in the purchase ledger is credited with £800.