Question

The term “By Returns” and a corresponding credit of $80 on a statement of account mean that a sum of $80 was:

a) Paid to the seller
b) Paid to the buyer
c) Added to the amount owing
d) Deducted from the amount owing

Answer 1

d) Deducted from the amount owing

Step-by-step explanation:

Returns refer to the goods previously sold to a customer, but the buyer has since rejected them and returned them to the seller. A buyer may reject goods due to various reasons, such as the goods being defective.

When a buyer rejects and returns goods, they are not expected to pay for them. The seller issues a credit note worth the goods returned. That amount is deducted from the invoice issued to the buyer.