Refunds Received from Suppliers

[Jeremy007]

How shall we understand the concept "refunds received from suppliers"? I don't quite understand why it's placed on the credit side of a payables ledger control a/c? because it seems to me that money received from the supplier should reduce the amount payable, which means it should be on the debit side.
Any help will be highly appreciated.

[siddharth]

Hi Jeremy

if there is receipt entry in payables a/c for refund, then there will be corresponding debit entry for the same amount to some other a/c, may be purchases account.

when goods are purchased for credit then entry is
purchases a/c dr. xx
suppliers a/c xx

when payment made
suppliers a/c dr. xx
bank a/c xx

as you said if refund is received and accounted in suppliers a/c then

bank a/c dr. xx
supplier a/c

this obviously increases suppliers account. so if you check your answer properly there will definetly be a entry like

supplier a/c dr. xx
purchases or some other a/c xx

because first when goods are received it is accounted in purchases a/c as expenses. so to reverse that entry, the above entry is necessary

hope you understand

[Jeremy007]

Siddharth, Many thanks for your prompt and helpful reply. Theorectically, I've understood now. But could you possible tell me a real life situation where a company will get refund from a supplier (for what reason)? Cheers.

[siddharth]

this case arises in many issues like supply of faulty goods, if goods doesn't correspond to the order etc., but if he is a regular supplier it will be set off against future payments.