If a firm, using a perpetual inventory system, purchases inventory on credit, and later returns $200 of goods to the vendor, including GST, what entry would be made to record the return of goods to the vendor?
A)$200 debit to Purchases and a $200 credit to Accounts payable
B)$200 debit to Accounts payable and a $200 credit to Purchases
C)$181.82 debit to Inventory, a $18.18 debit to GST Clearing and a $200 credit to Accounts payable
D)$200 debit to Accounts payable, a $181.82 credit to Inventory and a $18.18 credit to GST Clearing

Question

Quizplus · Accepted Answer

The return of goods reduces the liability (Accounts payable) and also reduces the Inventory and GST Clearing accounts. The $200 includes GST, so the Inventory is reduced by $181.82 and GST Clearing by $18.18.

If a Firm, Using a Perpetual Inventory System, Purchases Inventory