Perpetual Inventory System: Transactions and Closing Entries
Danny's Wholesale Company

Perpetual inventory system: transactions and closing entries
Danny's Wholesale Company uses a perpetual inventory system. A partial chart of accounts is shown below, followed by a series of merchandising transactions. Indicate the accounts that should be debited and credited in recording each transaction. (Ignore sales taxes.) $$\begin{array} { | l | l | l | l | } \hline 1 & \text { Cash } & 50 & \text { Sales } \\\hline 2 & \text { Accounts Receivable } & 60 & \text { Cost of Goods Sold } \\\hline 5 & \text { Inventory } & 99 & \text { Income Summary } \\\hline 30 & \text { Accounts Payable } & & \\\hline 40 & \text { Retained Earnings } & & \\\hline\end{array}$$ $\begin{array}{|l|l|l|l}\hline & { \text { Transartions } } & \begin{array} { c } \text { Accounts(s) } \\\text { Debited }\end{array} & \begin{array} { c } \text { Account(g) } \\\text { Credited }\end{array} \\\hline & \text { Example: Sold goods for cash } & 1,60 & 50,5 \\\hline \text { A } & \text { Purchased goods on account } & & \\\hline \text { B } & \text { Sold goods on account } & & \\\hline \text { C } & \text { Paid the supplier of the goods in transaction A } & & \\\hline \text { D } & \text { Collected cash from the customer in transaction B } & & \\\hline \text { E } & \begin{array}{l}\text { The physical inventory taken at year-end } \\\text { disclosed a normal amount of inventory shrinkage }\end{array} & & \\\hline \text { F } & \text { Made an entry to close the revenue account } & & \\\hline \text { G } & \begin{array}{l}\text { Made an entry at year-end to close the Cost of } \\\text { Goods Sold account }\end{array} & & \\\hline \text { H } & \begin{array}{l}\text { Closed the Income Summary account at the end of } \\\text { an unprofitable year }\end{array} & &\\\hline\end{array}$