A company uses the periodic inventory method.Which of the following entries would be made to record a return of $200 of inventory purchased on account?
A) The accounting entry would be a $200 debit to Purchase returns and allowances and a $200 credit to Accounts payable.
B) The accounting entry would be a $200 debit to Accounts payable and a $200 credit to Purchase returns and allowances.
C) The accounting entry would be a $200 debit to Purchases and a $200 credit to Accounts payable.
D) The accounting entry would be a $200 debit to Accounts payable and a $200 credit to Purchases.

Question

Quizplus · Accepted Answer

When using the periodic inventory method, the accounts payable account is credited when inventory is purchased on account, and debited when the invoice is paid. In case of a return, the Accounts payable should be debited to reduce the amount owed, and the Purchase returns and allowances account should be credited to record the return of inventory. Therefore, the correct entry is a $200 debit to Accounts payable and a $200 credit to Purchase returns and allowances. Option B is the only one that reflects these rules.

A Company Uses the Periodic Inventory Method