when using a perpetual inventory system, course hero

What is perpetual inventory system?

When using a perpetual inventory system a no. 1. When using a perpetual inventory system, a. no Purchases account is used. b. a Cost of Goods Sold account is used. c. two entries are required to record a sale. d. all of these. d. all of these .

What is the journal entry for difference between inventory and physical count?

 · Using the perpetual inventory system, record the following transactions in the general journal of James Ltd (assume GST does not apply) 3 marks each: 1. Purchased 240 units for $220 each on credit. 2. Returned 12 units to the supplier. 3. …

How is the cost of inventory transferred to cost of goods sold?

Using a perpetual inventory system, the seller’s journal entry to record the payment for merchandise, received from the buyer, within the discount period includes a: A) Debit to Sales Discounts B) Credit to Sales Discounts C) Debit to Accounts Receivable D) Debit to Cost of Goods Sold Answer: A Rationale: Under a perpetual inventory system, when a seller receives payment …

Why is there no purchase account in the Inventory account?

59. Companies using a perpetual inventory system: A. never physically count their inventory. B. must count their inventory at least once a week. C. still need to count the inventory at the end of the period. D. always know the actual amount in inventory from their accounting records.

Periodic Inventory System

Periodic inventory systems require a physical inventory count in order to update inventory records and to calculate the cost of merchandise sold.

Perpetual Inventory System

Perpetual inventory systems are updated each time a transaction occurs, providing real-time information on inventory levels and cost of merchandise sold.

Periodic versus Perpetual Inventory System

There are a number of differences between periodic inventory systems and perpetual inventory systems, including the accuracy of real-time inventory data, the entries used to record transactions, and the required physical counts of merchandise.

What is perpetual inventory?

Explanation. Perpetual inventory system provides a running balance of cost of goods available for sale and cost of goods sold. Under this system, no purchases account is maintained because inventory account is directly debited with each purchase of merchandise.

Why do merchandising companies use perpetual inventory?

The common reasons of such difference include inaccurate record keeping, normal shrinkage, and shoplifting etc. Both merchandising and manufacturing companies use perpetual inventory system. Merchandising companies use this system to maintain the record of merchandising inventory and manufacturing companies use to account for purchase and issue ...

What are some examples of expenses that are debited to inventory account?

These expenses are, therefore, also debited to inventory account. Examples of such expenses are freight-in and insurances etc. Each time the merchandise is sold, the related cost is transferred from inventory account to cost ...

How often is inventory count corrected?

The accuracy of this balance is periodically assured by a physical count – usually once a year. If a difference is found between the balance in inventory account and a physical count, it is corrected by making a suitable journal entry. The common reasons of such difference include inaccurate record keeping, normal shrinkage, and shoplifting etc.

What is the net price method used by Metro?

The Metro company uses net price method to record the purchase of inventory. The following journal entry would be made in the books of Metro company to record the purchase of merchandise: (2). On the same day, Metro company pays $320 for freight and $100 for insurance.

What is the difference between total cost of merchandise that could be sold in the accounting period and total cost of merchandise actually sold

is the cost of merchandise actually sold. The difference between the two numbers is the amount not sold, or the ending merchandise inventory

Why is cost of goods sold computed on income statement?

the cost of goods sold must be computed on the income statement because it is not updated for purchases, sales, and other transactions during the accounting period, as it is under the perpetual inventory system. cost of goods available for sale vs. cost of goods sold.

What is net cost of purchases?

(Net cost of purchases consist of total purchases plus freight-in less any deductions such as purchases returns and allowances and discounts from suppliers for early payment.)