Under a Perpetual Inventory System

question 139

Multiple Choice

Under a perpetual inventory system

• A) accounting records continuously disclose the amount of inventory
• B) increases in inventory resulting from purchases are debited to Purchases
• C) there is no need for a year-end physical count
• D) the purchase returns and allowances account is credited when goods are returned to vendors

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Definitions:

Closing Entries

Closing entries are journal entries made at the end of an accounting period to transfer temporary account balances to permanent accounts, clearing the temporary accounts for the next period.

Pre-closing Trial Balance

A listing of all active ledger accounts and their balances after adjusting entries are made but before closing entries, to verify the equality of debits and credits.

Closing Entries

Closing entries are journal entries made at the end of an accounting period to transfer temporary account balances to permanent accounts and prepare the company's books for the next period.

Dividends Account

An account used in bookkeeping that tracks dividends declared by a company to be paid out to its shareholders.