Final answer:
In a periodic inventory system, when a company sells inventory on credit, it records the sale by debiting Accounts Receivable and crediting Sales. This recognizes the revenue and the customer's obligation to pay. Additionally, the cost of goods sold is recorded by debiting Cost of Goods Sold and crediting Inventory, reflecting the expense and reducing the inventory value. So, the correct option is 1) Debit Accounts Receivable, Credit Sales
Explaination:
In a periodic inventory system, two separate journal entries are made when inventory is sold on credit: 1. To record the sale itself, you would: Debit Accounts Receivable, Credit Sales This entry reflects that the customer now owes the company money (thus increasing Accounts Receivable), and it also records the revenue from the sale.
2. To record the cost associated with the sale, you would: Debit Cost of Goods Sold, Credit Inventory This entry recognizes the expense related to the inventory that has been sold (thus increasing Cost of Goods Sold), and it decreases the value of inventory to reflect that items have been sold. The third option, Debit Accounts Payable, Credit Cash, is used to record the payment of liabilities, not the sale of inventory on credit.
The fourth option, Debit Cash, Credit Sales, is used when a sale is made for cash, not on credit. So, from the choices provided, the entry made by a company using a periodic inventory system on selling its inventory on credit would include both: 1) Debit Accounts Receivable, Credit Sales – to record the sale.
2) Debit Cost of Goods Sold, Credit Inventory – to record the cost of the inventory sold. Both are necessary for properly accounting the sale on credit in a periodic inventory system, but since you may need to choose one of the entries as the primary entry related to selling inventory on credit: The correct choice is: 1) Debit Accounts Receivable, Credit Sales.
So, the correct option is 1) Debit Accounts Receivable, Credit Sales