Final answer:
In a perpetual inventory system, the Merchandise Inventory account is indeed debited when merchandise is purchased. This system continuously updates inventory records, ensuring accurate and current data for financial reporting and business decision-making. The system contrasts with a periodic inventory system, where the inventory account is updated only at the end of the period.
Step-by-step explanation:
The assertion that in a perpetual inventory system, the Merchandise Inventory account is debited anytime merchandise is purchased is A. True. A perpetual inventory system involves continuously updating the inventory and cost of goods sold records every time an inventory purchase or sale happens. When a company purchases merchandise inventory, the transaction is recorded by debiting the Merchandise Inventory account, which is an asset account on the balance sheet, and crediting the Cash or Accounts Payable account, depending on whether the purchase was made with cash or on credit.
The purpose of this continuous tracking is to provide a highly accurate and up-to-date record of inventory quantities and costs, which is essential for efficient business operations and timely financial reporting. This process is contrasted with a periodic inventory system, where the inventory account is not updated with each purchase or sale. In such a system, inventory counts and valuations are updated only at the end of an accounting period through physical counts.
Upon the resale of the merchandise to a customer, the Merchandise Inventory account is credited, and the Cost of Goods Sold account, which is an income statement account, is debited for the cost of the merchandise sold. Businesses need to keep accurate records of these transactions to maintain financial integrity and to make informed management decisions.