In a periodic inventory system, a return of defective merchandise to a supplier is recorded by crediting
A) Accounts Payable.
B) Merchandise Inventory.
C) Purchases.
D) Purchase Returns and Allowances.

Question

Quizplus · Accepted Answer

In a periodic inventory system, the purchase returns and allowances account is used to record returns of defective merchandise to a supplier. This account is used to reduce the cost of goods purchased, which ultimately decreases the cost of goods sold and increases net income. The other options (Accounts Payable, Merchandise Inventory, and Purchases) are not used to record returns of defective merchandise in a periodic inventory system.

In a Periodic Inventory System, a Return of Defective Merchandise