Under a Perpetual Inventory System, When a Sale Is Made

question 88

Multiple Choice

Under a perpetual inventory system, when a sale is made:

• A)the company makes a journal entry to record the sale only.
• B)the company makes a journal entry to record only the cost of goods sold.
• C)the company makes a journal entry to record the sale and the cost of goods sold.
• D)no journal entry needs to be made.

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Definitions:

Inventory Turnover

A financial ratio that measures the number of times a company’s inventory is sold and replaced over a specific period, reflecting the efficiency of inventory management.

Cost of Goods Sold

Cost of Goods Sold (COGS) is an accounting term representing the direct expenses related to the production of items sold by a company, including materials and labor.

Current Assets

Assets that are expected to be converted into cash, sold or consumed within one year or within the business's operating cycle, whichever is longer.

Fixed Asset Turnover Ratio

A financial metric that measures a company's ability to generate net sales from its fixed assets, such as plant, property, and equipment, indicating efficiency in using these assets to generate revenue.