Question

The City of Pert uses the consumption method to account for inventory in its General Fund. Pert purchases $50,000 of inventory. Which account in the General Fund is debited when the purchase is made?

a. Expenditures—supplies
b. Supplies inventory
c. Vouchers payable
d. Non spendable fund balance

Answer 1

When the City of Pert purchases inventory using the consumption method in its General Fund, the Supplies Inventory account is debited.

Step-by-step explanation:

The consumption method of accounting for inventory is a basis of accounting for governments where supplies purchased are recorded as assets in the Inventory of Supplies account when they are acquired and then recognized as expenditures when they are consumed. In the City of Pert's General Fund, when the city purchases $50,000 of inventory, the account that is debited is Supplies Inventory.

At the same time, the Vouchers Payable account or another liability account would be credited to record the obligation to pay for the inventory. Therefore, the correct answer to the question of which account in the General Fund is debited when the purchase is made is b. Supplies Inventory.

When the City of Pert purchases $50,000 of inventory using the consumption method in its General Fund, the Expenditures—supplies account is debited. This account is used to track the expenditures made for supplies or inventory in the General Fund. By debiting this account, the City of Pert records the decrease in its fund balance due to the purchase of inventory.