Asked by Martie Coleman on May 17, 2024
Verified
When purchases of merchandise are made on account with a perpetual inventory system, the transaction is recorded with which entry?
A) debit Accounts Payable; credit Inventory
B) debit Inventory; credit Accounts Payable
C) debit Inventory; credit Cash Discounts
D) debit Inventory; credit Purchases
Perpetual Inventory
An inventory management system where inventory quantities and costs are updated continuously with each sale or purchase transaction.
Accounts Payable
Liabilities of a business that represent its obligations to pay off a short-term debt to its creditors or suppliers.
Inventory
The overall quantity of products and resources that a business possesses, which are either for sale or to be utilized in manufacturing.
- Recognize the accounting entries for purchases and sales under a perpetual inventory system.
Verified Answer
AM
Amber McCauleyMay 23, 2024
Final Answer :
B
Explanation :
When merchandise is purchased on account, it means the payment will be made at a later date. Therefore, we need to increase the inventory account and increase the accounts payable liability account. The transaction is recorded with a debit to the inventory account and a credit to the accounts payable account.
Learning Objectives
- Recognize the accounting entries for purchases and sales under a perpetual inventory system.