Under A Perpetual Inventory System, Acquisition Of Merchandise For Resale Is Debited To The | In A Perpetual Inventory System, The Cost Of Goods Sold Account Is Used:

Under A Perpetual Inventory System, Acquisition Of Merchandise For Resale Is Debited To The a. inventory account b. cost of goods sold account c. purchases account d. supplies account In A Perpetual Inventory System, The Cost Of Goods Sold Account Is Used: a. only when a cash sale of merchandise occurs. b. only when a credit sale of merchandise occurs. c. whenever there is a sale of merchandise or a return of merchandise sold. d. only when a sale of merchandise occurs.
1. The correct option of this multiple choice question (mcq) is (a), as under perpetual inventory system, the merchandise or goods purchased or acquired for resale is recorded under inventory account. There is no need to open separate purchases account to record purchase of merchandise on account / credit unlike periodic inventory system.

The double entries to record are shown below:

(a) Merchandise Acquired On Account

Inventory a/c XXX

                  Accounts Payable a/c XXX

(Merchandise Purchased On Account)

(b) Merchandise Acquired For Cash For Resale Purpose

Inventory a/c XXX

                  Cash a/c XXX

(Merchandise Purchased For Cash)

All other options are incorrect choices here.

2. The correct option is (c), as under perpetual inventory system, when the selling company sold goods to customers on account or for cash or goods sold are returned by customers affect inventory account which also needs to match with the cost of these goods sold or returned.

The journal entries to record in case of goods sold and returned are shown below:

(a) Goods Sold On Account

(i) Accounts Receivable a/c XXX

                                      Sales a/c XXX

(Merchandises Sold To Customers On Account)

(ii) Cost of Goods Sold a/c XXX

                                 Inventory a/c XXX

(To Update Inventory)

(b) Goods Sold For Cash

(i) Cash a/c XXX

            Sales a/c XXX

(Merchandise Sold To Customers On Account)

(ii) Cost of Goods Sold a/c XXX

                                 Inventory a/c XXX

(To Update Inventory)

(a) Customers To Whom Goods Sold On Account Returned The Goods (Sales Returns)

(i) Inventory a/c XXX

                  Accounts Receivable a/c XXX

(Merchandise Returned By Customers)

(ii) Inventory a/c XXX

                          Cost of Goods Sold a/c XXX

(To Adjust Inventory)

(b) Goods Sold For Cash Returned By Customers

(i) Inventory a/c XXX

                  Cash a/c XXX

(Goods Returned By Customers)

(ii) Inventory a/c XXX

                          Cost of Goods Sold a/c XXX

(To Adjust Inventory Due To Sales Returns)

The options a, b and d are incorrect choices here.

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