Purchase returns and allowances involve _______.
A)reducing payables and expenses, improving reported liquidity and earnings
B)increasing payables and expenses, improving reported liquidity and earnings
C)reducing payables and expenses, decreasing reported liquidity and earnings
D)increasing payables and expenses, decreasing reported liquidity and earnings

Question

Quizplus · Accepted Answer

Purchase returns and allowances involve reducing payables and expenses, which improves reported liquidity and earnings. When a company returns goods to a supplier or receives a reduction in the purchase price due to a defect or other issue, the amount owed to the supplier is decreased, resulting in a reduction of payables. Additionally, the expense associated with the original purchase is reduced, which can improve reported earnings.

Purchase Returns and Allowances Involve _______