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

Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory

Financial Accounting

4. Merchandising Operations

Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory

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Multiple Choice

When the perpetual inventory system is used, the inventory sold is debited to which account?

Sales Revenue

Cost of Goods Sold

Inventory

No account is debited; instead, Inventory is credited and Cost of Goods Sold is debited

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Verified step by step guidance

Understand the perpetual inventory system: In this system, inventory records are updated in real-time as transactions occur. This means that every sale or purchase of inventory is immediately reflected in the accounting records.

Identify the accounts involved: When inventory is sold, two accounts are affected—Cost of Goods Sold (COGS) and Inventory. COGS represents the expense of the inventory sold, and Inventory represents the value of goods on hand.

Determine the journal entry for the sale: In the perpetual inventory system, the cost of the inventory sold is recorded by debiting the Cost of Goods Sold account and crediting the Inventory account. This reflects the reduction in inventory and the recognition of the expense.

Clarify why Sales Revenue is not debited: Sales Revenue is credited (not debited) to record the income from the sale of goods. The debit for this transaction would typically go to Accounts Receivable or Cash, depending on whether the sale was on credit or for cash.

Summarize the correct answer: The correct accounts affected when inventory is sold under the perpetual inventory system are Cost of Goods Sold (debited) and Inventory (credited). No other accounts are debited in this process.