Perpetual Inventory System: Transactions and Closing Entries
Danny's Wholesale Company

question 105

Essay

Perpetual inventory system: transactions and closing entries
Danny's Wholesale Company uses a perpetual inventory system. A partial chart of accounts is shown below, followed by a series of merchandising transactions. Indicate the accounts that should be debited and credited in recording each transaction. (Ignore sales taxes.) $$\begin{array} { | l | l | l | l | } \hline 1 & \text { Cash } & 50 & \text { Sales } \\\hline 2 & \text { Accounts Receivable } & 60 & \text { Cost of Goods Sold } \\\hline 5 & \text { Inventory } & 99 & \text { Income Summary } \\\hline 30 & \text { Accounts Payable } & & \\\hline 40 & \text { Retained Earnings } & & \\\hline\end{array}$$ $\begin{array}{|l|l|l|l}\hline & { \text { Transartions } } & \begin{array} { c } \text { Accounts(s) } \\\text { Debited }\end{array} & \begin{array} { c } \text { Account(g) } \\\text { Credited }\end{array} \\\hline & \text { Example: Sold goods for cash } & 1,60 & 50,5 \\\hline \text { A } & \text { Purchased goods on account } & & \\\hline \text { B } & \text { Sold goods on account } & & \\\hline \text { C } & \text { Paid the supplier of the goods in transaction A } & & \\\hline \text { D } & \text { Collected cash from the customer in transaction B } & & \\\hline \text { E } & \begin{array}{l}\text { The physical inventory taken at year-end } \\\text { disclosed a normal amount of inventory shrinkage }\end{array} & & \\\hline \text { F } & \text { Made an entry to close the revenue account } & & \\\hline \text { G } & \begin{array}{l}\text { Made an entry at year-end to close the Cost of } \\\text { Goods Sold account }\end{array} & & \\\hline \text { H } & \begin{array}{l}\text { Closed the Income Summary account at the end of } \\\text { an unprofitable year }\end{array} & &\\\hline\end{array}$

---

Definitions:

Self-Verification

The theory that people have a need to seek confirmation of their self-concept, whether positive or negative, from others in their social environment.

Self-Concept

An individual's perception of themselves, which includes beliefs, feelings, and knowledge about personal attributes.

Needs Hierarchy

A motivational theory proposed by Abraham Maslow, suggesting that humans are motivated by a hierarchy of needs, starting from basic physical necessities to higher psychological needs.

Values Congruency

The alignment or correspondence between the values of individuals within an organization, which can enhance cooperation and reduce conflict.