In its trial balance a business has opening inventory of £40000, £ 129000 purchases and you are told its year-end inventory figure is £60000 what entries do you need to make in the final adjustments?
A) Credit inventory with £40000 and debit cost of sales, debit £ 60000 to cost of sales and debit inventory credit purchases with £129000 and debit cost of sales
B) Debit inventory with £40000 and credit cost of sales, debit £ 60000 to cost of sales and credit inventory, credit purchases with £129000 and debit cost of sales
C) Credit inventory with £40000 and debit cost of sales, credit £ 60000 to cost of sales and debit inventory, credit purchases with £129000 and debit cost of sales
D) Credit inventory with £40000 and debit cost of sales, debit £ 60000 to cost of sales and debit inventory debit purchases with £129000 and credit cost of sales

Question

Quizplus · Accepted Answer

The correct entry involves removing the opening inventory from the cost of sales (credit inventory, debit cost of sales for £40000), adding the year-end inventory to the inventory account (credit £60000 to cost of sales and debit inventory), and recording the purchases during the year in the cost of sales (credit purchases with £129000 and debit cost of sales). This accurately reflects the cost of goods sold and updates the inventory values.

In Its Trial Balance a Business Has Opening Inventory of £40000