Question

A company that maintains a perpetual inventory system has an inventory account balance of $50,000. The physical count of goods on hand totals $49,600. Which of the following adjusting entries is correct?A. debit Purchases and credit Inventory.B. debit Cost of Goods Sold and credit Inventory.C. debit Inventory and credit Purchases.D. debit Sales Discounts and credit Inventory.

Answer 1

Answer:

B. debit Cost of Goods Sold and credit Inventory.

Explanation:

A perpetual inventory system records as and when the transaction takes place. All of its sale and purchase is recorded as and when it takes place.

Thus, if there is difference in actual inventory and that in records, it must be because of inventory being issued for sale.

It provides that value of inventory shall be bought down to physical vale and that the cost of goods sold shall be increased.

Since inventory is an asset, decreasing its value shall be done by crediting the account.

And cost of goods sold is an expense and shall be increased by debiting it.