![]() ![]() However, the company that uses the periodic inventory system usually has the purchase returns and allowances account in order to record the transactions of the goods returns or other compensations that the company receives from vendors or suppliers. Hence, the refund event here will usually be related to the purchase account instead of the inventory account. This is due to the inventory will only be updated when the company performs the actual physical count of the inventory (usually at the end of the period). Under the periodic inventory system, the company records the purchase of inventory goods into the purchase account instead of recording it directly into the inventory account like that of the perpetual inventory system. As cash and inventory are both asset items on the balance sheet, there is zero impact on total assets in this transaction.Īlso, the credit of the inventory account in this journal entry is required in order to have a correct balance of inventory on the balance sheet regardless the refund event is due to the mistake of overcharged invoice or due to the returns of purchased goods. In this journal entry, the credit of the inventory account is to reduce its balance by the amount of refund that the company receives. Account Debit Credit Cash/bank 000 Inventory 000 In this case, the company can make the journal entry for refund from the vendor for the inventory goods that it has purchased by debiting the cash or bank account for the amount and crediting the same amount into the inventory account. Likewise, the refund event which results in the original purchase being void (due to return of goods) or in the reduction of cost of inventory goods (due to overcharged invoice) will directly impact the inventory account. Under the perpetual inventory system, the company records the purchase transaction of inventory into the inventory account as the balance of inventory needs to be updated perpetually. Journal entry for refund from vendor Refund related to inventory goods However, it is usually the same for the not-inventory goods as it is simply the reverse of the original journal entry based on the amount of the refund. Journal entry for refund from vendor or supplier is a bit different for inventory goods from one company to another if one company uses the perpetual inventory system and another company uses the periodic inventory system. Of course, the vendor may also choose to issue the credit memo to its customer of stead of the refund if the company agrees. In this case, the vendor will usually refund the company for the overcharged amount. And another case of refund is that there is a mistake in the invoice that results in the vendor or suppliers overcharge the company on its purchase. There are various reasons for the company to return the purchased goods to get the refund from the supplies include the defective goods, damage of goods, as well as the wrong specification of goods, or the company simply no longer needs the purchased goods and the goods are still in the return period. Likewise, the company needs to make the journal entry for refund from vendor or supplier in order to account for the cash received as well as to correct the balance of the asset or the amount of purchase or expense that it has before the refund. ![]() In business, the company may receive a refund from its vendor or supplier due to various reasons such as the return of goods or a mistake of overcharged invoice. Journal entry for refund from vendor Overview ![]()
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