Charmed, Inc. purchased merchandise from Birch Co. for cash. The journal entry for Charmed, Inc. under a perpetual inventory system will be:

Question

Quizplus · Accepted Answer

When a company purchases merchandise for cash under a perpetual inventory system, it increases its inventory (an asset) and decreases its cash (another asset). Therefore, the correct journal entry is to debit Inventory (to record the increase in inventory) and credit Cash (to record the decrease in cash).