Which of the following statements is correct?

Question

Quizplus · Accepted Answer

To record a cash purchase of merchandise, the accountant would debit Purchases (an increase in an expense account) and credit Cash (a decrease in the asset account). A is incorrect because Purchase discounts is a contra expense account, not a contra revenue account. B is incorrect because a cash payment transaction could also involve credits to accounts such as Purchases Discounts or Returns and Allowances. C is incorrect because the entry to record the payment of an invoice within the discount period would include a credit to the Purchases Discounts account, not a debit.

Which of the Following Statements Is Correct