How are purchase returns and purchase discounts recorded by a company using the periodic inventory system?

Question

Quizplus · Accepted Answer

Purchase returns and purchase discounts are recorded in contra-accounts to the Purchases account in the periodic inventory system. This is because the Purchases account is used to record the gross amount of purchases made during the period, and purchase returns and discounts are reductions to this amount. By recording them in contra-accounts, the net amount of purchases can be easily calculated.

How Are Purchase Returns and Purchase Discounts Recorded by a Company