When a company uses a perpetual inventory system,
A) there is no purchases account
B) the cost of goods sold account is used
C) two entries are required when inventory is sold
D) All of these answer choices are used in a perpetual inventory system.

Question

Quizplus · Accepted Answer

In a perpetual inventory system, there is indeed no purchases account because purchases are directly recorded into the inventory account. The cost of goods sold account is used to record the cost of inventory sold at the time of sale. Additionally, two entries are required when inventory is sold: one to record the revenue and reduce inventory, and another to record the cost of goods sold. Therefore, all of these choices are aspects of a perpetual inventory system.

When a Company Uses a Perpetual Inventory System