Question

Which of the following is an entry made by a company using a periodic inventory system on selling its inventory on credit?

1) Debit Accounts Receivable, Credit Sales Revenue
2) Debit Cost of Goods Sold, Credit Inventory
3) Debit Accounts Payable, Credit Cash
4) Debit Cash, Credit Accounts Receivable

Answer 1

The entry made by a company using a periodic inventory system on selling its inventory on credit is Debit Accounts Receivable, Credit Sales Revenue.

Step-by-step explanation:

The entry made by a company using a periodic inventory system on selling its inventory on credit is Debit Accounts Receivable, Credit Sales Revenue.

In a periodic inventory system, the company doesn't continuously update the inventory account for each sale. Instead, it makes an entry to recognize the sale by debiting Accounts Receivable (to recognize the increase in the accounts receivable from the customer) and crediting Sales Revenue (to recognize the increase in sales).

This entry reflects the increase in the company's accounts receivable and the corresponding increase in its sales revenue.