At the end of the month BBB Ltd determined that the cost to them of goods that had been sold during the month was $125,000.How would this information be recorded?
A)The information is not recorded as no economic event had taken place.
B)Dr.Expenses $125,000, Cr Inventory $125,000.
C)Dr.Inventory $125,000, Cr Cash $125,000.
D)Dr.Expenses $125,000, Cr.Accounts payable of $125,000

Question

Quizplus · Accepted Answer

The cost of goods sold is recorded as an expense and reduces the inventory balance, so the correct entry would be to debit Expenses and credit Inventory. Choice A is incorrect as there is an economic event that has taken place. Choice C is incorrect as there is no cash transaction involved in this event. Choice D is incorrect as there is no mention of any payable.

At the End of the Month BBB Ltd Determined That