When purchasing inventory on account in a perpetual inventory system, which of the following is TRUE?
A)The journal entry would be exactly the same for all inventory costing methods.
B)LIFO and FIFO inventory valuation methods require a debit to inventory while all others require a debit to purchases.
C)GAAP does not allow inventory to be purchased on account.
D)The average costing method requires a credit to inventory.

Question

Quizplus · Accepted Answer

In a perpetual inventory system, regardless of the inventory costing method used (LIFO, FIFO, Average Cost, etc.), the initial journal entry for purchasing inventory on account involves debiting the Inventory account and crediting Accounts Payable or Cash. The costing method affects how the cost of goods sold and ending inventory are calculated, not the basic entry for purchasing inventory.

When Purchasing Inventory on Account in a Perpetual Inventory System