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College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570

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BuyFindarrow_forward

College Accounting (Book Only): A ...

13th Edition
Scott + 1 other
ISBN: 9781337280570
Textbook Problem

This type of inventory system does not require an entry to Merchandise Inventory until a physical inventory has been taken.

  1. a. Periodic inventory system
  2. b. Perpetual inventory system
  3. c. Merchandise inventory system
  4. d. Beginning inventory system
  5. e. Ending inventory system

To determine

Identify the inventory system that does not require an entry until a physical inventory has been taken.

Explanation

Merchandise Inventory: Merchandise is the stock of goods bought by a wholesaler, or a retailer, or a trader, to be sold within a year. Merchandise Inventory is a current asset account which includes all the costs incurred to acquire merchandise, and process it further for sale.

Justification for correct answer:

  • Option (a) Periodic inventory system: The method or system of recording the transactions related to inventory occasionally or periodically are referred to as periodic inventory system. In periodic inventory system we do not make an entry in the merchandise inventory until an actual physical inventory has been taken. Hence, it is correct answer...

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