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

In a periodic inventory system, the cost of purchases is debited to which account?

Cost of Goods Sold account

Purchases account

Sales account

Inventory account

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Verified step by step guidance

Understand the periodic inventory system: In a periodic inventory system, inventory is not updated continuously. Instead, purchases are recorded in a separate account, and the inventory balance is updated only at the end of the accounting period.

Identify the purpose of the Purchases account: The Purchases account is used to record the cost of goods acquired during the period. It acts as a temporary account to track purchases until the inventory is adjusted at the end of the period.

Clarify why the Cost of Goods Sold account is not debited: The Cost of Goods Sold account is updated at the end of the period when inventory adjustments are made. It reflects the cost of goods sold during the period, not the cost of purchases.

Explain why the Sales account is not debited: The Sales account is used to record revenue from selling goods or services, not the cost of purchasing inventory.

Discuss why the Inventory account is not debited: In a periodic inventory system, the Inventory account is updated only at the end of the period based on physical counts and adjustments, not when purchases are made.