Returned merchandise paid for within the discount period for cash. The perpetual inventory system is in use. This return will be recorded with:

Question

Quizplus · Accepted Answer

Under the perpetual inventory system, when merchandise is returned (that was paid for within the discount period for cash), the return is recorded by debiting (decreasing) a liability account (such as Accounts Payable or the specific vendor account) and crediting (decreasing) an asset account (such as Inventory or Cash, depending on the specifics of the transaction). However, the correct answer reflects a debit and a credit to asset accounts, which aligns with adjusting the inventory asset account for the return of goods and the cash or accounts payable for the refund or adjustment. This indicates a correction in the explanation; the correct transaction would involve adjusting the inventory (an asset) and the cash/accounts payable (also an asset or a liability, respectively), depending on whether the refund is received in cash or as a credit. The correct detailed explanation should note this correction: the transaction involves adjusting asset accounts, typically decreasing Inventory and increasing Cash or decreasing Accounts Payable, reflecting the return of inventory and the refund or credit received.

Returned Merchandise Paid for Within the Discount Period for Cash