What is the correct entry to record the return of inventory from a customer?

To record the return of inventory from a customer, the appropriate entry involves debiting Inventory and crediting Cost of Goods Sold. When a customer returns inventory, it is essentially being reinstated into the business's inventory, which is why the Inventory account increases and is debited.

By debiting Inventory, the accounting records reflect that the business has regained possession of $1,500 worth of goods that can be sold again in the future. Conversely, crediting Cost of Goods Sold makes adjustments to the expense recognized when the goods were originally sold to the customer, effectively reversing the expense associated with those goods as they are no longer sold.

This entry aligns with the fundamental accounting principle of maintaining correct balances in the inventory and expense accounts, tracking the lifecycle of goods accurately as they move through sales and returns.