Using a perpetual inventory system,which journal entry(ies)is(are)prepared when two units of merchandise are sold on account?

Question

Quizplus · Accepted Answer

When two units of merchandise are sold on account, the first entry is to debit Accounts Receivable and credit Sales Revenue for the amount of the sale. The second entry is to debit Cost of Goods Sold and credit Inventory for the cost of the two units sold. This reflects the fact that the company has used up two units of inventory to generate the revenue from the sale. Therefore, option C is the correct answer. Option A is incorrect because it does not account for the reduction of inventory. Option B is incorrect because it assumes that the sale was made for cash, rather than on account. Option D is incorrect because it mistakenly credits Cost of Goods Sold, which is an expense account, instead of debiting it.

Using a Perpetual Inventory System,which Journal Entry(ies)is(are)prepared When Two Units