In a Perpetual Inventory System, Two Entries Usually Are Made

question 67

Multiple Choice

In a perpetual inventory system, two entries usually are made to record each sales transaction. The purposes of these entries are best described as follows:

• A) One entry recognizes the sales revenue, and the other recognizes the cost of goods sold.
• B) One entry records the purchase of the goods, and the other records the sale.
• C) One entry records the cost of goods sold, and the other reduces the balance in the Inventory account.
• D) One entry updates the general ledger, and the other updates the subsidiary ledgers.

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Definitions:

Standard Costing

A cost accounting method that assigns expected costs to each unit of production to help managers identify variances between expected and actual costs.

Labour Efficiency Variance

The difference between the actual hours worked and the standard hours expected to produce a certain level of output, multiplied by the standard hourly rate.

Labour Rate Variance

The difference between the actual cost of labor and the expected (or standard) cost, based on the hours worked.

Direct Material Units

Refers to the physical units of raw materials that are directly traceable and integral to the finished product.