When Purchases of Merchandise Are Made on Account with a Perpetual

question 245

Multiple Choice

When purchases of merchandise are made on account with a perpetual inventory system, the transaction is recorded with which entry?

• A) debit Accounts Payable; credit Inventory
• B) debit Inventory; credit Accounts Payable
• C) debit Inventory; credit Cash Discounts
• D) debit Inventory; credit Purchases

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Definitions:

Cash Payments

Transactions in which money is paid out or disbursed by a business, typically related to operational expenses, purchases, or other financial obligations.

Raw Materials Inventory

The total cost of all components and materials a company holds that are yet to be used in the manufacturing process.

Direct Material

Direct Material refers to the raw materials that can be directly attributed to the production of goods, clearly identifiable and quantifiable.

Production Needs

Refers to the resources and requirements necessary to manufacture goods or provide services, including materials, labor, and machinery.