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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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What is a perpetual inventory accounting system? What journal entries are involved?

To determine

Explain the meaning of perpetual inventory accounting system, and state the journal entries that are involved in this system.

Explanation

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Explain the meaning of perpetual inventory accounting system and state the journal entries that are involved in this system as follows:

Perpetual inventory system refers to the inventory system that maintains the detailed records of every inventory transactions related to purchases, and sales on a continuous basis. It shows the exact inventory on hand at any point of time.

Journal entry at the time of inventory purchase:

DateAccount Title & ExplanationDebit ($)Credit($)
XXXInventoryXXX 
 Cash/Accounts payable XXX
 (To record the inventories purchased on account/with cash)  

Table (1)

Journal entry at the time of sale of inventory:

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