When purchases of merchandise are made for cash, under the perpetual inventory system, the transaction:

Question

Quizplus · Accepted Answer

When merchandise is purchased for cash under the perpetual inventory system, it increases the Merchandise Inventory account as well as decreases the Cash account. This is because cash is paid for the purchase, reducing the Cash account balance, while the Merchandise Inventory account reflects the increase in inventory from the purchase.

When Purchases of Merchandise Are Made for Cash, Under the Perpetual