If Merchandise Inventory increases from the beginning to the end of the fiscal period, the adjusting entry includes a credit to Merchandise Inventory.

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When Merchandise Inventory increases from the beginning to the end of the fiscal period, it indicates that the company has purchased more inventory than it has sold. The adjusting entry to record the increase in inventory would typically involve a debit to Merchandise Inventory (to increase the asset account) and a credit to Accounts Payable or Cash, depending on how the inventory was purchased, not a credit to Merchandise Inventory.

If Merchandise Inventory Increases from the Beginning to the End