How should you record a return of items to a supplier in your journal?

When recording a return of items to a supplier in your journal, the correct approach involves debiting either Accounts Payable or Cash and crediting Inventory. This method aligns with the fundamental principles of accounting, which include accurately reflecting the decrease in liability due to the return of goods and adjusting the inventory account accordingly.

By debiting Accounts Payable, you are recognizing that the obligation to pay the supplier has decreased because you are returning unsatisfactory or surplus items. Alternatively, if you've already paid for the items returned, debiting Cash indicates that you will receive a refund for that amount.

The corresponding credit to Inventory effectively reduces the asset account as you are returning items that were previously part of your inventory. This reflects a true picture of the assets you hold. Correctly adjusting these accounts is vital for maintaining the accuracy of financial statements.

This method directly represents the economic reality of the transaction, ensuring that both the decrease in liabilities and the reduction in inventory are accounted for in one entry.