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

Question

Quizplus · Accepted Answer

The perpetual inventory method involves recording inventory transactions as they occur. When a company purchases inventory on account, the accounting entry would involve debiting the inventory account to increase the inventory on hand and crediting the accounts payable account to record the liability. Therefore, the correct accounting entry would be a debit to Inventory and a credit to Accounts payable.

A Company Uses the Perpetual Inventory Method