Optimizing Purchase Return Recording in Perpetual Inventory System for Accurate Inventory and Accounts Payable Management – A Comprehensive Guide

Under the perpetual inventory system, the entry to record a purchase return would include a credit to which account?

Merchandise Inventory

Under the perpetual inventory system, a purchase return is recorded by reducing the inventory and increasing the accounts payable. Therefore, the entry to record a purchase return would include a credit to the inventory account and a debit to the accounts payable account.

For example, if a company purchased $1,000 worth of inventory on credit from a supplier and then returned $200 of it, the entry to record the purchase return would be:

Debit: Accounts Payable – $200 (to reduce the amount owed to the supplier)
Credit: Inventory – $200 (to reduce the merchandise held in inventory)

It is important to note that this entry would only be made under the perpetual inventory system where inventory levels are constantly monitored and updated.

More Answers: