In a perpetual inventory system,the journal entry to record the sale of merchandise on account would include a:
A)debit to Cost of Goods Sold
B)credit to Accounts Payable
C)debit to Inventory
D)credit to Cash

Question

Quizplus · Accepted Answer

In a perpetual inventory system, the cost of goods sold is immediately recognized at the time of the sale. Therefore, the journal entry to record the sale of merchandise on account would include a debit to Cost of Goods Sold. The credit would be to Accounts Receivable, not Accounts Payable as this entry reflects that the customer owes the company money. There would be no credit to Cash since the sale was made on account (credit). There would also be no debit to Inventory since the inventory has already been reduced when the item was sold.

In a Perpetual Inventory System,the Journal Entry to Record the Sale