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Q5-25RQ

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Horngren'S Financial And Managerial Accounting
Found in: Page 294

Short Answer

What account is debited when recording a purchase of inventory when using a periodic inventory system?

The purchase account is debited when recording a purchase of inventory while using a periodic inventory system.

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Step by Step Solution

Meaning of Periodic Inventory System

A periodic inventory system refers to the system in which an inventory account is updated at the end of an accounting period. It facilitates the business entities to track their opening and closing inventory balances.

Recording of inventory purchases under a periodic inventory system

When inventory is purchased under the periodic inventory system, the purchase account is debited to record such a transaction.

Journal entry to record the purchase of inventory is as follows:

Date

Accounts and Explanation

Debit ($)

Credit ($)

Purchases

XXX

Cash/Accounts payable

XXX

(To record the purchase of inventory)

Most popular questions for Business-studies Textbooks

Journalize the following transactions that occurred in January 2018 for Sylvia’s Amusements. No explanations are needed. Identify each accounts payable and accounts receivable with the vendor or customer name. Sylvia estimates sales returns at the end of each month.

Jan. 4 Purchased merchandise inventory on account from Vanderbilt Company, $7,000. Terms 1/10, n/EOM, FOB shipping point.

6 Paid freight bill of $100 on January 4 purchase.

8 Returned half the inventory purchased on January 4 from Vanderbilt Company.

10 Sold merchandise inventory for cash, $1,600. Cost of goods, $640. FOB destination.

11 Sold merchandise inventory to Graceland Corporation, $10,800, on account, terms of 1/10, n/EOM. Cost of goods, $5,400. FOB shipping point.

12 Paid freight bill of $60 on January 10 sale.

13 Sold merchandise inventory to Cabbell Company, $9,500, on account, terms of n/45. Cost of goods, $5,225. FOB shipping point.

14 Paid the amount owed on account from January 4, less return and discount.

17 Received defective inventory as a sales return from the January 13 sale, $600. Cost of goods, $300.

18 Purchased inventory of $4,600 on account from Roberts Corporation. Payment terms were 3/10, n/30, FOB destination.

20 Received cash from Graceland Corporation, less discount.

26 Paid amount owed on account from January 18, less discount.

28 Received cash from Cabbell Company, less return.

29 Purchased inventory from Sandra Corporation for cash, $11,600, FOB shipping point. Freight in paid to shipping company, $240.

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