BUISENESS MANAGEMENT
MERCHANDISING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Two journal entries are necessary:one to record the receipt of cash and sales revenue, and one to record the cost of goods and reduction of inventory.
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Only one journal entry is necessary to record the receipt of cash and the sales revenue.
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Two journal entries are necessary:one to record the receipt of cash and reduction of inventory, and one to record the cost of goods sold and sales revenue.
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Only one journal entry is necessary to record cost of goods sold and reduction of inventory.
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Detailed explanation-1: -The correct answer is Option-C In a perpetual inventory system, the transaction of the sale of goods for cash is recorded using two journal entries. The first journal entry records the receipt of cash from the customer which increases the sales revenue of the company.
Detailed explanation-2: -When a sale occurs under perpetual inventory systems, two entries are required: one to recognize the sale, and the other to recognize the cost of sale. For the cost of sale, Merchandise Inventory and Cost of Goods Sold are updated.
Detailed explanation-3: -When selling merchandise using a perpetual inventory system, two journal entries must be made-one to record the sales revenue and another to record the reduction in merchandise inventory.
Detailed explanation-4: -Journal Entries for Merchandise Purchaser (Perpetual Method) As inventory is purchased, the Merchandise account is debited. As inventory is sold, the Merchandise Inventory account is credited, and Cost of Goods Sold is debited for the cost of the inventory sold.