Question

Using a perpetual inventory system, the sale of inventory on account would be recorded as?

1) debit cost of goods sold; credit inventory
2) debit inventory; credit sales revenue
3) debit accounts receivable; credit sales revenue
4) i only
5) ii only
6) iii only
7) i and iii

Answer 1

In a perpetual inventory system, the sale of inventory on account is recorded by debiting accounts receivable, crediting sales revenue, and crediting inventory.

Step-by-step explanation:

Using a perpetual inventory system, the sale of inventory on account would be recorded by making two separate journal entries. The first entry would debit Accounts Receivable and credit Sales Revenue to record the sale. The second entry would debit Cost of Goods Sold (COGS) and credit Inventory to reflect the cost of the inventory that was sold. The sale of inventory on account using a perpetual inventory system would be recorded as follows:

1. Debit accounts receivable; this is because the sale is made on account, meaning the customer owes the company money.
2. Credit sales revenue; this records the revenue generated from the sale.
3. Credit inventory; this reduces the quantity and value of the inventory that was sold.

Therefore, the correct option would be iii) Debit accounts receivable; credit sales revenue; and credit inventory.