Question

why do you need to be ready for customers who might return merchandise.    

Answer 1

We Should be ready for the Customers who will return our goods due to the following reasons:

• If Customer Purchase Wrong Product
• If Product is no Longer Needed
• If Product Does not match its description
• If a Customer purchased goods to gift someone and that gift was not correct
• If Product is Damaged Upon Arrival
• If Merchant sent the wrong Product

So there can be many reasons for returning of goods by customers. Currently, many Businesses are on their top due to their Return Policy Example, If Amazon will not have its return policy then many people will not buy products from him.

The Gross Profit at the end of the year is computed by subtracting the Cost of Goods Sold from Net Sales and for Computing Net Sales we need to Subtract Sales Return from Total Sales or we can say that Gross Profit is computed on the units which are actually sold, So by deducting the Return amount we compute the actual units sold.  

At the end of the year, we need to compute the Asset and Liability of the business. All the returns by the Customers will arise the liability of the firm named Customer Refund Payable So we need to compute the amount payable to the customers. Several adjustments shall also me made in this account if the customer accounts are sttled.