Which of the following is true of a sale on account using a periodic inventory system?Multiple ChoiceCost of Goods Sold will be debited.Inventory will be credited.Accounts Receivable will be credited.No entry is required for inventory reduction.
Question
Which of the following is true of a sale on account using a periodic inventory system?Multiple ChoiceCost of Goods Sold will be debited.Inventory will be credited.Accounts Receivable will be credited.No entry is required for inventory reduction.
Solution
The correct answer is "Accounts Receivable will be credited."
Here's why:
In a periodic inventory system, the inventory is not updated continuously. Instead, it is updated at the end of each period (usually annually).
When a sale on account occurs, the company does not immediately record the cost of the goods sold. Instead, they record the sale by debiting Accounts Receivable and crediting Sales Revenue.
The inventory and cost of goods sold are not adjusted until the end of the period when a physical count of the inventory is done. Therefore, the statements "Cost of Goods Sold will be debited" and "Inventory will be credited" are not correct in the context of a periodic inventory system.
Finally, the statement "No entry is required for inventory reduction" is also not correct. While it's true that the inventory is not immediately reduced when a sale on account occurs, an entry is required at the end of the period to adjust the inventory and record the cost of goods sold.
Similar Questions
Which of the following statements about a periodic inventory system is true? Group of answer choices Under the periodic inventory system purchases of inventory are typically credited to the Purchases account. Available discounts taken by the customer for early payment of an invoice are termed discount received by the seller. Freight-in is an account that is subtracted from the Purchases account to arrive at the net cost of goods purchased. Under the periodic inventory system, allowances granted by the supplier to the merchandiser are credited to the Purchases Returns and Allowances account.
Summarize a periodic inventory system by selecting all of the correct statements below.Multiple select question.The Purchases account is used during the period.The Purchase Discounts account is used during the period.The Purchase Returns and Allowances account is used during the period.When a company records a sale, it also records the cost of the goods sold.The Merchandise Inventory account is updated every time a sale is made.Cost of goods sold is computed at the end of the period.The balance in the Merchandise Inventory account remains the beginning balance until the end of the period.The Merchandise Inventory account is updated only at the end of the period.
Under a periodic inventory system, the Merchandise Inventory account is debited when goods are purchased for resale and credited when goods are sold and delivered to customers
LO 6.7 Which of the following accounts are used when recording a purchase using a periodic inventory system?Choose one answer from the options below.A. cash, purchasesB. accounts payable, salesC. accounts payable, accounts receivableD. cash, merchandise inventory
In the periodic inventory system, the purchase of inventory on credit is accounted for as follows:a.Debit purchases, Credit Inventory.b.Debit purchases, Credit Cash.c.Debit inventory, Credit Creditors.d.Debit purchases, Credit creditor
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