What happens to the purchases account when merchandise is purchased on account?

When merchandise is purchased on account, the purchases account is debited. This reflects an increase in expenses since purchasing inventory is considered a cost of goods sold for the business. Debiting the purchases account represents an addition of assets (inventory) to the company, signifying that the company has incurred a liability due to purchasing on account. This transaction increases both the purchases account and accounts payable, illustrating that the business owes money for the goods received.

In contrast, options that suggest crediting the purchases account or leaving it unchanged do not align with standard accounting principles. The concept of adjusting the purchases account based on sales applies to recognizing revenues from sales rather than recording purchases and does not pertain to this specific transaction of acquiring merchandise on account. Thus, debiting the purchases account is the correct interpretation of how this transaction impacts the accounting records.