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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Rules of debit and credit for periodic inventory accounts

Complete the following table by indicating for (a) through (g) whether the proper answer is debit or credit:

Account Increase Decrease Normal Balance
Purchases debit (a) (b)
Purchases Discounts credit (c) credit
Purchases Returns and Allowances (d) (e) (f)
Freight In debit (g) debit

To determine

Periodic Inventory System: It is a system in which the inventory is updated in the accounting records on a periodic basis such as at the end of each month, quarter or year. In other words, it is an accounting method which is used to determine the amount of inventory at the end of each accounting period.

To Describe: The normal balance of the following accounts.

Explanation

(a)

Purchase account is an expense account. It increases the value of expenses by debiting the account and decreases the value of expense by crediting the account with the respective amount.

(b)

Purchase account is an expense account. Therefore, purchase account shows a normal debit balance.

(c)

Purchase discount is an income. It increases the value of equity by crediting the account and decreses the value of equity by debiting the account with the respective amount.

(d)

Purchase returns and allowances account is a contra expense account...

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