How are purchase discounts and purchase returns recorded by a company using the periodic inventory system?
A) As a direct reduction to the Purchases account
B) As miscellaneous expenses
C) In contra accounts to the Purchases account
D) As operating expenses

Question

Quizplus · Accepted Answer

Purchase discounts and purchase returns are recorded in contra accounts to the Purchases account under the periodic inventory system. This is to accurately reflect the net amount of purchases made during the accounting period.

How Are Purchase Discounts and Purchase Returns Recorded by a Company