MANAGEMENT

Detailed explanation-1: -If merchandise are purchased on account, the accounts involved in the transaction are the purchases account and accounts payable account. The purchases account is debited and the accounts payable account is credited.

Detailed explanation-2: -Purchases-Used to record all purchases of merchandise for resale, this is one of the largest expense accounts of a merchandiser. It is classified as a cost of goods sold account.

Detailed explanation-3: -Under the periodic system, a temporary expense account named merchandise purchases, or simply purchases, is used to record the purchase of goods intended for resale.

Detailed explanation-4: -Within accounting, merchandise is considered a current asset because it’s usually expected to be liquidated (sold, turned into cash) within a year. When purchased, merchandise should be debited to the inventory account and credited to cash or accounts payable, depending on how the merchandise was paid for.

Detailed explanation-5: -The purchases account is a general ledger account in which is recorded the inventory purchases of a business. This account is used to calculate the amount of inventory available for sale in a periodic inventory system.