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Davis Hardware Company Uses a Perpetual Inventory System

question 46

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Davis Hardware Company uses a perpetual inventory system. How should Davis record the sale of merchandise, costing $620 and sold for $960 on account?


Definitions:

Journal

A basic accounting record where all the financial transactions of a business are initially recorded in chronological order before being posted to accounts in the ledger.

Liability Accounts

Accounts on a balance sheet representing what a company owes to others, including loans, mortgages, and accounts payable.

Debits

Entries on the left-hand side of an accounting ledger, indicating increases in assets or expenses or decreases in liabilities or equity.

Transactions

Economic activities or events that affect the financial position of a company and can be quantified in monetary terms.

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