The appearance of a purchases account in a trial balance usually indicates that the company is using a periodic inventory system.

Question

Quizplus · Accepted Answer

This is because in a periodic inventory system, the balance in the purchases account reflects the total amount of inventory purchased during the accounting period, whereas in a perpetual inventory system, the purchases account is not used as inventory purchases are recorded directly in the inventory account.

The Appearance of a Purchases Account in a Trial Balance