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

Perpetual Inventory - Purchases

Financial Accounting

4. Merchandising Operations

Perpetual Inventory - Purchases

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Multiple Choice

Which of the following is an example of a perpetual inventory system for recording purchases?

Recording each purchase of inventory directly in the inventory account as it occurs

Counting inventory only at the end of the year to determine cost of goods sold

Estimating inventory levels based on sales forecasts

Recording purchases in a Purchases account and updating inventory only at period end

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Verified step by step guidance

Understand the concept of a perpetual inventory system: A perpetual inventory system continuously updates inventory records in real-time as transactions occur, including purchases and sales.

Analyze the first option: 'Recording each purchase of inventory directly in the inventory account as it occurs.' This aligns with the perpetual inventory system because it involves real-time updates to the inventory account.

Evaluate the second option: 'Counting inventory only at the end of the year to determine cost of goods sold.' This describes a periodic inventory system, not a perpetual one, as updates are made only at specific intervals.

Assess the third option: 'Estimating inventory levels based on sales forecasts.' This is not a perpetual inventory system because it relies on estimates rather than actual transaction data.

Review the fourth option: 'Recording purchases in a Purchases account and updating inventory only at period end.' This also describes a periodic inventory system, where inventory updates occur at the end of the accounting period rather than in real-time.