Journal entries to record inventory transactions under a perpetual inventory system



[Q1] An entity uses a perpetual inventory system.
On June 12, the entity purchased $24,000 inventory on account.
Prepare a journal entry to record this transaction.

[Journal Entry]

  Debit Credit
Inventory 24,000  
     Accounts payable   24,000

[Notes]
Debit: Increase in inventory
Credit: Increase in accounts payable
Under a perpetual inventory system, inventory purchases during the period are recorded in the “Inventory” account.
Under a perpetual inventory system, inventory account is continuously updated each time inventory is purchased and sold.

[Q2] On June 25, the entity sold $10,000 inventory at the sale price of $16,000 on account.
Prepare journal entries to record this transaction.

[Journal Entry]

  Debit Credit
Accounts receivable 16,000  
     Sales revenue   16,000

[Notes]
Debit: Increase in accounts receivable
Credit: Increase in sales revenue

  Debit Credit
Cost of sales 10,000  
     Inventory   10,000

[Notes]
Debit: Increase in cost of sales
Credit: Decrease in inventory
Under a perpetual inventory system, inventory account is updated as inventory is purchased and sold.

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