Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

4. Merchandising Operations

Periodic Inventory - Purchases

Financial Accounting

4. Merchandising Operations

Periodic Inventory - Purchases

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Multiple Choice

Which of the following is true of a sale on account using a periodic inventory system?

The inventory account is credited immediately when the sale occurs.

No entry is made to update the inventory account at the time of sale.

Cost of goods sold is recorded at the time of each sale.

Accounts receivable is not affected by sales on account.

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Verified step by step guidance

Understand the periodic inventory system: In a periodic inventory system, inventory updates and cost of goods sold (COGS) calculations are not made at the time of each sale. Instead, these updates occur at the end of the accounting period.

Analyze the first option: 'The inventory account is credited immediately when the sale occurs.' This is incorrect because, under a periodic inventory system, the inventory account is not updated at the time of sale.

Analyze the second option: 'No entry is made to update the inventory account at the time of sale.' This is correct because, in a periodic inventory system, inventory updates are deferred until the end of the accounting period.

Analyze the third option: 'Cost of goods sold is recorded at the time of each sale.' This is incorrect because, under a periodic inventory system, COGS is calculated and recorded at the end of the accounting period, not at the time of sale.

Analyze the fourth option: 'Accounts receivable is not affected by sales on account.' This is incorrect because sales on account do affect accounts receivable, as the company records the amount owed by the customer at the time of sale.