In a perpetual inventory system, when merchandise is returned to the seller, Cost of Merchandise Sold is debited as part of the transaction.

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In a perpetual inventory system, when merchandise is returned to the seller, the inventory account and accounts payable or cash accounts are usually affected, but not the Cost of Merchandise Sold account. The reason being that the Cost of Merchandise Sold account is only debited when the sale of the merchandise is made, not when it is returned.

In a Perpetual Inventory System, When Merchandise Is Returned to the Seller