Periodic Inventory - Purchases quiz #1 Flashcards
Periodic Inventory - Purchases quiz #1
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How are inventory purchases recorded in a periodic inventory system, and how does this differ from a perpetual inventory system?
In a periodic inventory system, inventory purchases are recorded in a separate 'purchases' account rather than directly in the inventory account. In contrast, a perpetual system records purchases directly in the inventory account. What is the accounting treatment for goods returned to suppliers in a periodic inventory system?
When goods are returned to suppliers, the company debits accounts payable and credits the 'purchase returns' account, which is a contra asset account that reduces the value of inventory. How are purchase allowances recorded in a periodic inventory system, and what do they represent?
Purchase allowances are recorded by debiting accounts payable and crediting the 'purchase allowances' account. They represent reductions in the purchase price due to quality issues or other problems, while the goods are kept. What is the purpose of the 'purchase returns and allowances' account in the periodic inventory system?
The 'purchase returns and allowances' account is used to track the value of goods returned to suppliers and allowances granted for defective goods, reducing the total cost of inventory purchased. How are purchase discounts for prompt payment handled in a periodic inventory system?
Purchase discounts for prompt payment are recorded in a separate 'purchase discounts' account, which reduces the total cost of inventory purchased when reconciling accounts at the end of the period. At the end of an accounting period, how is the final inventory and cost of goods sold determined in a periodic inventory system?
At the end of the period, the balances in the purchases, purchase returns and allowances, and purchase discounts accounts are reconciled to determine the final inventory value and the cost of goods sold. How are inventory purchases recorded in a periodic inventory system, and how does this differ from a perpetual inventory system?
In a periodic inventory system, purchases are recorded in a separate 'purchases' account, not directly in the inventory account, whereas in a perpetual system, purchases are recorded directly in the inventory account. What is the accounting treatment for goods returned to suppliers in a periodic inventory system?
When goods are returned, accounts payable is debited and the 'purchase returns' account is credited, reducing the value of inventory through this contra asset account. How are purchase allowances recorded in a periodic inventory system, and what do they represent?
Purchase allowances are recorded by debiting accounts payable and crediting the 'purchase allowances' account, representing reductions in purchase price due to issues like poor quality while keeping the goods. At the end of an accounting period, how is the final inventory and cost of goods sold determined in a periodic inventory system?
The balances in the purchases, purchase returns and allowances, and purchase discounts accounts are reconciled at the end of the period to determine the final inventory value and cost of goods sold.
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