When recording a customer refund, which document should you use if the refund is paid in cash?

• A. Credit Memo
• B. Invoice
• C. Sales Receipt
• D. Refund Receipt

Answer: (D)

When a customer is refunded in cash, you document it with a refund receipt. This type of record specifically captures the cash outflow to the customer and adjusts the customer’s balance accordingly, effectively reversing the original sale in your books. A credit memo is used to credit a customer’s account for returns or allowances that may apply to future purchases or outstanding balances, not to issue immediate cash refunds. An invoice is a request for payment from the customer, not a record of returning cash. A sales receipt tracks a cash sale and increases revenue, which isn’t appropriate for recording a refund.