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What is the effect of a purchase return on the inventory account?

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Question: What is the effect of a purchase return on the inventory account?

Options:

  1. Increase inventory
  2. Decrease inventory
  3. No effect on inventory
  4. Transfer inventory to expenses

Correct Answer: Decrease inventory

Solution: 

A purchase return decreases the inventory account as the goods are returned to the supplier.

What is the effect of a purchase return on the inventory account?

Practice Questions

Q1
What is the effect of a purchase return on the inventory account?
  1. Increase inventory
  2. Decrease inventory
  3. No effect on inventory
  4. Transfer inventory to expenses

Questions & Step-by-Step Solutions

What is the effect of a purchase return on the inventory account?
  • Step 1: Understand what a purchase return is.
  • Step 2: Identify what the inventory account is.
  • Step 3: Recognize that returning goods means the business no longer has them.
  • Step 4: Conclude that this results in a decrease in the inventory account.
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