Which of the following entries would be made to record the purchase of inventory on account,if a company uses the perpetual inventory system?
A) a debit to Purchases and a credit to Accounts Payable
B) a debit to Accounts Payable and a credit to Purchases
C) a debit to Merchandise Inventory and a credit to Accounts Payable
D) a debit to Accounts Payable and a credit to Merchandise Inventory

Question

Quizplus · Accepted Answer

In a perpetual inventory system, every purchase of inventory is immediately recorded in the inventory account. Therefore, the entry to record a purchase of inventory on account would be a debit to Merchandise Inventory to increase the balance of inventory and a credit to Accounts Payable to increase the balance of accounts payable. Option A is incorrect because the Purchases account is used in a periodic inventory system, not a perpetual inventory system. Option B is incorrect because it records the opposite effect of the transaction. Option D is incorrect because it debits accounts payable, the liability account, instead of debiting inventory.

Which of the Following Entries Would Be Made to Record