A company received a credit memorandum for $100 from a supplier for defective product returned. Using a periodic inventory system, this transaction would be recorded with a which of the following entries:
Check all that apply.
credit to accounts payable
credit to purchases returns & allowances
debit to accounts payable
debit to purchases returns & allowances
Answer :
Credit to purchases returns and allowances
Debit to accounts payable
Explanation :
When a company receives credit memorandum from supplier, it means that the supplier in his books credited the company's account for returning the goods.
When it comes to company's books, before this credit memorandum purchase transaction has been recorded by debiting 'purchases account' and crediting 'accounts payable account'. Later, when goods are returned and the credit memorandum has been received from supplier for the confirmation of goods returned, purchase entry has to be reversed to the extent of $100.
Purchase entry would be reversed by debiting 'accounts payable account' and crediting 'purchases returns and allowance account'. Accounts payable account has to be debited as the liability of company reduced and 'purchases returns and allowances account' has to be credited as purchase expense reduced by returning goods.
A company received a credit memorandum for $100 from a supplier for defective product returned
A company received a credit memorandum for $100 from a supplier for defective product returned. Using a periodic inventory system, this transaction would be recorded with a credit to the _______ account. Click the answer you think is right. purchases returns & allowances merchandise inventory purchases
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On May 4, Roscoe Grocery received merchandise costing $3,500 with freight charges of $200 paid by the supplier and added to the invoice, terms 2/10, 1/30. Some goods were returned, and, on May 11, the supplier issued a credit memo in the amount of $400. Roscoe paid the amount due on May 14 and recorded the transaction with a debit to: Click the answer you think is right. accounts payable cash purchases discounts purchases returns and allowances
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