What happens to the purchases account when merchandise is bought for cash?

When merchandise is bought for cash, the purchases account is debited. This is because debiting the purchases account reflects an increase in inventory or assets, indicating that the company has more merchandise on hand. In accounting, purchases of inventory are recorded as a debit, showing that the company is acquiring more goods for resale.

The cash account, on the other hand, is credited in this transaction to reflect the decrease in cash assets since the company paid cash for the merchandise. The purchase process leads to an overall increase in expenses related to sales within the business, cementing the value of the merchandise gained. As a standard accounting practice, the purchases account captures all costs associated with acquiring inventory, reinforcing the idea of maintaining a well-organized financial record.

All other choices do not accurately describe the impact on the purchases account when merchandise is acquired.