With a perpetual inventory system,assets and equity increase by the amount of the gross margin when inventory is sold.

Question

Quizplus · Accepted Answer

In a perpetual inventory system, the cost of goods sold and the reduction in inventory are recorded at the time of sale. This means that when inventory is sold, the gross margin (revenue minus cost of goods sold) is immediately recognized and recorded as an increase in assets (cash or accounts receivable) and equity.

With a Perpetual Inventory System,assets and Equity Increase by the Amount