A firm uses the periodic inventory method. Which of the following entries would be made to record a purchase of inventory on credit?
A)The accounting entry would be a debit to Inventory, a debit to GST Clearing and a credit to Accounts payable.
B)The accounting entry would be a debit to Accounts payable, a credit to Purchases and a credit to GST Clearing.
C)The accounting entry would be a debit to Accounts payable, a credit to Inventory and a credit to GST Clearing.
D)The accounting entry would be a debit to Purchases, a debit to GST Clearing and a credit to Accounts payable.

Question

Quizplus · Accepted Answer

In the periodic inventory system, purchases are recorded by debiting the Purchases account, not the Inventory account. The entry also includes a debit to GST Clearing and a credit to Accounts Payable.

A Firm Uses the Periodic Inventory Method