Cash and Sales Returns

Sales returns is inclusive of refunds, credits, or special price reductions known as allowances. Therefore, it is important to accrue returns and allowances at the time of sale, avoiding overstating the income statement.
 
Therefore, the accounting will be FOR CASH SALES:

• Debit Cash
• Credit Sales Return
• Debit COGS
• Credit Inventory

 
Then if a return were to occur you will FOR CASH SALES:

• Debit Sales Returns
• Credit Cash
• Debit Inventory
• Credit COGS

 
If you are “expecting” a sales return, your accounting could be FOR CASH SALES:

• Debit Sales Return
• Credit Refund Liability
• Debit Inventory for estimated inventory
• Credit COGS

 
If the “expecting” does actualize to a sales return, you will FOR CASH SALES:

• Debit Refund Liability
• Credit Cash
• Debit Inventory
• Credit Inventory for Estimated Returns