Assume that a company uses a perpetual inventory system and records the return of inventory previously purchased on account a debit to Accounts Payable and a credit to Inventory.This entry is:
A) incorrect and will cause assets to be overstated
B) incorrect and will cause assets to be understated
C) incorrect and will cause liabilities to overstated
D) correct

Question

Quizplus · Accepted Answer

In a perpetual inventory system, when inventory is returned, the correct entry is to debit Accounts Payable and credit Inventory, as it reflects the reduction in liability and inventory.

Assume That a Company Uses a Perpetual Inventory System and Records