In a Periodic Inventory System, the Cost of Purchases Is

question 35

Multiple Choice

In a periodic inventory system, the cost of purchases is debited to:

• A) Purchases.
• B) Cost of goods sold.
• C) Inventory.
• D) Accounts payable.

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Definitions:

Adverse Selection

A situation where asymmetric information leads to the selection of undesirable risks by one party in a transaction, often seen in insurance and financial markets.

Moral Hazard

When a party whose actions are unobserved can affect the probability or magnitude of a payment associated with an event.

Asymmetric Information

Asymmetric information exists when one party in a transaction has more or better information than the other, potentially leading to an imbalance in power or unfair outcomes.

Standardization

The process of making something conform to a standard, typically to facilitate compatibility and interoperability among multiple items or systems.