Asked by Kennedy Kaiser on Jun 05, 2024
Verified
The journal entry to record a purchase of inventory on credit under the perpetual system includes:
A) a credit to Merchandise Inventory.
B) a debit to Cash.
C) a credit to Accounts Payable.
D) Both A and C are correct.
Perpetual System
Perpetual System is an inventory tracking system where inventory and cost of goods sold are updated continuously with each sale or purchase.
Accounts Payable
Accounts payable represent a company's obligation to pay off a short-term debt to its creditors or suppliers, often arising from the purchase of goods or services on credit.
Merchandise Inventory
The value of a company's commodities or goods available for sale to customers at any given time.
- Master the documentation of transactions for the procurement and return of inventory governed by the perpetual inventory system.
Verified Answer
SM
Sabrina MarieJun 09, 2024
Final Answer :
C
Explanation :
Under the perpetual inventory system, when inventory is purchased on credit, the entry includes a debit to Merchandise Inventory to record the increase in inventory and a credit to Accounts Payable to record the obligation to pay the supplier in the future. Therefore, option C is correct.
Learning Objectives
- Master the documentation of transactions for the procurement and return of inventory governed by the perpetual inventory system.