Leather Accessories Transaction Journal Entry

What is the journal entry for Leather Accessories to record the return of merchandise purchased on account?

Leather Accessories returned merchandise that was purchased on account to Leather Distributing, $875. What is the journal entry for Leather Accessories to record this transaction?

Journal Entry for Leather Accessories

The journal entry for the return of merchandise purchased on account in the books of Leather Accessories would be a debit to Accounts Payable - Leather Distributing and a credit to Inventory, each for $875.

When Leather Accessories returns merchandise that was purchased on account to Leather Distributing, it affects the Accounts Payable and Inventory accounts. Accounts Payable (an account representing money owed by the business to its suppliers) decreases while the Inventory (an asset representing unsold goods) also decreases.

To record this transaction, a journal entry needs to be made. The journal entry would be as follows:

Debit: Accounts Payable - Leather Distributing $875

Credit: Inventory $875

This journal entry ensures that the financial statements accurately reflect the return of merchandise purchased on account by Leather Accessories.