Question

Owens Jewelers uses the perpetual inventory system. On April 2, Owens sold merchandise with a cost of $1,500 for $8,000 to a customer on account with terms of 1/5, n/30. Which of the following journal entries correctly records the sales revenue?

A) Debit Accounts Receivable $8,000, Credit Sales Revenue $8,000
B) Debit Sales Revenue $8,000, Credit Accounts Receivable $8,000
C) Debit Cash $8,000, Credit Sales Revenue $8,000
D) Debit Sales Revenue $8,000, Credit Cash $8,000

Answer 1

The correct journal entry for Owens Jewelers using the perpetual inventory system to record the sales revenue is a debit to Accounts Receivable and a credit to Sales Revenue for $8,000.

Step-by-step explanation:

To record the sales revenue on a perpetual inventory system when Owens Jewelers sold merchandise, the correct journal entry would be to debit Accounts Receivable and credit Sales Revenue. Therefore, the correct entry for the given scenario is:

Debit Accounts Receivable $8,000
Credit Sales Revenue $8,000

This entry reflects the increase in Accounts Receivable and the recognition of sales at the time of the sale. The cash has not yet been received, and therefore, Cash should not be debited. The entry correctly applies the accrual basis of accounting, where revenues are recognized when earned, not when the cash is received.