Assets and stockholders equity decreases when merchandise returned by the customers is recorded.
When merchandise is returned by the customer, the sales returns and allowances account is debited to reduce sales, and accounts receivable or cash is credited to refund cash or reduce what is owed by the customer. This leads to the decrease in assets and stockholders equity in a retail store.
A second entry must also be made debiting inventory to put the returned items back. In this entry, we debit the cash account and the credit accounts receivable account.
Hence, this effects on a retail stores accounting equation.
To learn more about merchandise here:
https://brainly.com/question/16135131
#SPJ4
