When using a perpetual inventory system, a business will debit Merchandise Inventory and credit Cost of Goods Sold each time a sale is recorded.

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In a perpetual inventory system, Merchandise Inventory is only debited when inventory is purchased, and Cost of Goods Sold is only credited when inventory is sold. The debit and credit are not recorded every time a sale is made.

When Using a Perpetual Inventory System, a Business Will Debit