Purchase Returns and Allowances account is one of the contra-asset account, particularly a contra-purchases account. The normal balance of the Purchase Returns and Allowances is credit. This decreases amount of Purchases to arrive at Net Purchases. This is also an account used by the buyer.
Transactions under this account occur because of certain problems encountered during the purchase of inventories, such as defective merchandise purchased, incorrect specification between products purchased and products delivered and goods were damaged while in transit due to seller's fault.
See also Purchase Returns and Purchase Allowances to check their difference.