Readers ask: Which statement is true when recording the sale of goods for cash in a perpetual inventory system?

How do you record sales in a perpetual inventory system?

Under the perpetual inventory method each time there is a movement journals are processed to record the change. Purchases are debited to inventory and sales are credited to inventory, with the debit going to the cost of goods sold account.

What two journal entries are made when inventory is sold under a perpetual system?

B3. Under the perpetual system, two sets of entries are made whenever merchandise is sold: (1) the sales amount is debited to Accounts Receivable or Cash and is credited to Sales, and (2) the cost of the merchandise sold is debited to Cost of Goods Sold and is credited to Inventory.

Which of the following accounts is debited when a company using the perpetual inventory system buys merchandise inventory?

What account is debited when recording a purchase inventory when using the perpetual inventory system? The Merchandise Inventory account is debited when recording the purchase of inventory using the perpetual inventory system.

What type of accounts are sales returns and allowances and sales discounts?

*Sales discounts and sales returns and allowances are contra-accounts. Notice how they increase with a debit and decrease with a credit even though they are revenue accounts.

When would you use a perpetual inventory system?

The calculations for perpetual inventory are typically done as you go versus waiting until the end of the accounting period, like with periodic inventory. Businesses that use POS systems and sell high-value items (e.g., car dealerships) usually use perpetual inventory systems to frequently count inventory.

What accounts are used in a perpetual inventory system?

Under the perpetual system, inventory purchases are recorded in either the raw materials inventory account or merchandise account (depending on the nature of the purchase), while there is also a unit-count entry into the individual record that is kept for each inventory item.

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Why do companies use perpetual inventory system?

A perpetual inventory system gives an ecommerce business an accurate view of stock levels at any time without the manual process required for a periodic inventory system. The automation that a perpetual inventory system provides frees up time and capital.

Is Accounts Payable a debit or credit?

In finance and accounting, accounts payable can serve as either a credit or a debit. Because accounts payable is a liability account, it should have a credit balance. The credit balance indicates the amount that a company owes to its vendors.

When merchandise is sold and the perpetual system of inventory is used the journal entry?

debiting Accounts Receivable and crediting Sales. Explanation: When merchandise is sold and the perpetual system of inventory is used, the journal entry for a sale would include debiting Accounts Receivable and crediting Sales.

When Alexander Company purchased supplies worth $500 it incorrectly recorded a credit to supplies for $5000 and a debit to cash for $5000 before correcting this error?

When Alexander Company purchased supplies worth $500, it incorrectly recorded a credit to Supplies for $5,000 and a debit to Cash for $5,000. Before correcting this error: Cash is overstated and Supplies is understated.

Where is merchandise inventory listed on a merchandiser’s balance sheet?

In the current assets section of a​ merchandiser’s balance ​ sheet, Merchandise Inventory will be listed below Accounts Receivable because Merchandise Inventory is considered less liquid than Accounts Receivable.

Which is an indicator of profitability?

The most commonly used profitability indicators are: net profit margin, EBITDA margin, EBIT margin, return on equity return on invested capital (ROI), return on equity and return on capital employed.

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Is discount an expense or income?

Discounts allowed represent a debit or expense, while discount received are registered as a credit or income. Both discounts allowed and discounts received can be further divided into trade and cash discounts.

What is the journal entry for sales discount?

Debit the cash account in a new journal entry in your records by the amount of cash you received from your customer. Debit the sales discounts account by the amount of the discount. A debit increases both of these accounts. In this example, debit cash by $99 and debit sales discounts by $1.

Is sales return an income or an expense?

In the sales revenue section of an income statement, the sales returns and allowances account is subtracted from sales because these accounts have the opposite effect on net income. Therefore, sales returns and allowances is considered a contra‐ revenue account, which normally has a debit balance.

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