What is the normal balance for the Purchases Returns (Purchase Returns) account?

• A. Debit.
• B. Credit.
• C. Credit.
• D. Zero.

Answer: (C)

Purchases Returns (Purchase Returns) is a contra-expense account. It exists to record goods that are returned to suppliers and it reduces the overall amount of purchases shown in the income statement. Because it reduces purchases, its normal balance is on the credit side.

When a return happens, you credit the Purchases Returns account (increasing its credit balance) and debit the supplier (or accounts payable / cash) to reflect the outflow. For example, if you had recorded 1,000 in purchases and then return 200, you would credit Purchases Returns by 200, leaving net purchases of 800. This shows why the normal balance is a credit.