In a perpetual inventory system, when merchandise is returned to the supplier, cost of merchandise sold is debited as part of the transaction.

A perpetual inventory system is an effective means of control over inventory. When a sale is made, under this system, both the sale and cost of merchandise sold are recorded. In case that merchandise is returned to the supplier, the Cost of Merchandise Sold is not debited as part of the transaction. Therefore the above statement is FALSE.

 

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