A company pays an invoice early and takes 4% off of the original invoice price. The account to be credited for this amount under a perpetual inventory system is:

Question

Quizplus · Accepted Answer

Under a perpetual inventory system, when a company takes a discount for early payment, the amount of the discount reduces the cost of the inventory purchased. Therefore, the Inventory account is credited to reflect the reduced cost of the goods.

A Company Pays an Invoice Early and Takes 4% Off