Ace Your Principal Account Clerk 2026 Exam – Unlock the Civil Service Success!

When merchandise is purchased on account, the transaction involves an increase in what the business owes to its suppliers, which is documented in the Accounts Payable account. This indicates that the business has received inventory without making an immediate cash payment, thereby creating a liability.

In this situation, the Accounts Payable account is credited to reflect the obligation to pay the supplier in the future. This entry accurately records the increase in liabilities resulting from the purchase.

The other choices do not appropriately represent the accounting treatment for such transactions. For instance, the Purchases account is typically debited to record the inventory increase, while the Cash account would not be affected as no cash is exchanged at the time of purchase. Also, the Sales account is irrelevant here as it is used when goods are sold rather than purchased. Hence, Accounts Payable is the account that correctly captures the transaction when merchandise is acquired on credit.