Question

A company uses a perpetual inventory system. How should the company record the return of inventory previously purchased on account for $200?

1) inventory 200, accounts payable 200
2) accounts payable 200, inventory 200
3) purchase returns 200, accounts payable 200
4) accounts payable 200, purchase returns 200

Answer 1

In a perpetual inventory system, a company should record the return of inventory previously purchased on account by debiting purchase returns and crediting accounts payable.

Step-by-step explanation:

In a perpetual inventory system, a company should record the return of inventory previously purchased on account by debiting purchase returns and crediting accounts payable.

In this case, the company should record the return of inventory by journalizing the entry as:

1. Purchase Returns 200
2. Accounts Payable 200