What do purchase returns represent in accounting?

Purchase returns represent transactions where goods that were previously purchased are returned to the supplier. This transaction occurs when items do not meet quality standards, are incorrect shipments, or are otherwise unsatisfactory.

Choosing "negative purchases" accurately describes the nature of purchase returns. When a company returns goods, it effectively reduces the amount spent on purchases, reflecting a decrease in the purchases account since it offsets the total cost of goods acquired. In accounting, this adjustment is necessary to accurately represent inventory and expenses, as it helps maintain an accurate picture of what was actually purchased.

While inventory would indeed be affected by this return (since the company would have fewer assets in inventory), the term "negative purchases" more explicitly highlights the accounting impact of reducing the total purchases, aligning clearly with the nature of a return.

The other options do not capture this fundamental aspect of purchases and returns accurately and therefore do not convey the correct interpretation of purchase returns in accounting.