Question

Using a perpetual inventory system, the entry to record the return of goods you previously purchased on account includes a _____. (Check all that apply and answer from the viewpoint of the buyer.)

a. debit to Accounts Payable
b. credit to Accounts Receivable
c. credit to Inventory
d. debit to Purchase Returns
e. credit to Cash

Answer 1

In a perpetual inventory system, the journal entry for returning goods previously purchased on account includes debiting Purchase Returns, debiting Accounts Payable, and crediting Inventory to account for the reduction in assets and liabilities.

Step-by-step explanation:

When using a perpetual inventory system and returning goods that were previously purchased on account, as the buyer, the correct entries would involve:

• A debit to Purchase Returns which acknowledges the return of the goods and decreases your expenses related to purchases.
• A credit to Inventory to reflect the reduction in the goods available for sale.
• A debit to Accounts Payable, signifying a reduction in the amount you owe to the seller due to the return of the goods.

Therefore, the correct answers are a. debit to Accounts Payable, and c. credit to Inventory. The entry to record the return would not include a credit to Accounts Receivable or a credit to Cash, as these would not reflect a transaction where you are returning goods to a supplier.