Purchase returns and allowances decrease the net amount of cash that will be paid for the inventory,and so they should reduce the cost of the inventory as recorded in the Inventory account.

Question

Quizplus · Accepted Answer

Purchase returns and allowances decrease the cost of goods purchased, which in turn should reduce the cost of the inventory recorded in the Inventory account. This reflects a decrease in the amount of cash that will be paid for the inventory. Therefore, the statement is true.

Purchase Returns and Allowances Decrease the Net Amount of Cash