Question

When using a perpetual inventory system,

a. no Purchases account is used.
b. a Cost of Goods Sold account is used.
c. two entries are required to record a sale.
d. All of these answer choices are correct.

Answer 1

In a perpetual inventory system, no Purchases account is used, a Cost of Goods Sold account is continuously updated, and two entries are necessary to record a sale. Therefore, all of the provided answer choices are correct.

Step-by-step explanation:

When using a perpetual inventory system, several characteristics define its operation:

• No Purchases account is used since inventory is continuously updated.
• A Cost of Goods Sold (COGS) account is maintained to record the cost of inventory as it is sold.
• When recording a sale, two entries are typically required: one to record the revenue and another to record the cost of the goods sold.

In summary, all of the provided answer choices are correct:

1. A Purchases account is not used.
2. A Cost of Goods Sold account is used.
3. Two entries are required to record a sale.