When a company uses a perpetual inventory system,
A) there is no purchases account
B) the cost of goods sold account is used
C) two entries are required when inventory is sold
D) all of these

Question

Quizplus · Accepted Answer

A perpetual inventory system tracks inventory in real-time and updates the inventory account as items are bought and sold. Therefore, there is no need for a purchases account. The cost of goods sold account is used to record the cost of inventory items sold. In a perpetual system, two entries are required when inventory is sold - one to update the cost of goods sold account and another to reduce the inventory account. Therefore, all of the above statements are correct.

When a Company Uses a Perpetual Inventory System