Returned merchandise for credit on account. The perpetual inventory system is in use. This will be recorded with:

A) a debit to a liability and a credit to an expense.
B) a debit to an asset and a credit to an expense.
C) a debit to a liability and a credit to an asset.
D) a debit to an expense and a credit to a liability.

Question

Caleb Schultz · Accepted Answer

Final Answer : C, Explanation :  When merchandise is returned for credit on account under the perpetual inventory system, the entry involves debiting a liability (to reduce the amount owed to the supplier) and crediting an asset (to reduce the inventory account, reflecting the return of goods).

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