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I need help recording a journal entry for an inventory purchase?
Shankar Company uses a perpetual system to record inventory transactions. The company purchases 1,000 units of inventory on account on February 2, 2012, for $35,000 ($35 per unit) but then returns 30 defective units on February 5, 2012.
Record the inventory purchase on February 2 and the inventory return on February 5.
For February 2nd I recorded
Dr Merchandise Inventory $35,000
Cr Accounts Payable $35000
For February 5th I recorded
(I cannot figure out Debits account) $1050
Cr Merchandise Inventory $1050
As you can see I am confused with only the debits account for February 5th. Please any help or explanation would be beneficial. Thank you and have a nice day
1 Answer
- anonymousLv 77 years agoFavorite Answer
The debit goes to Accounts Payable. After all, the company returned the items and hence no longer owes money for those items.
The return removes the items from Merchandise Inventory via a credit, and reduces the Accounts Payable via a debit.
