Q5-13RQ - Horngren'S Financial And Managerial Accounting

Question

What are the two journal entries involved when recording the sale of inventory when using the perpetual inventory system?

Step-by-Step Solution

Answer

In the perpetual inventory system, two primary journal entries include the following:

1. Entry to record the sale,
2. Entry to record the cost of goods sold.

Meaning of Inventory Management System

A system that tracks the incoming and outgoing inventories and manages the shortages and re-ordering tasks of the same is termed an inventory management system.

Journal entries recorded at the time of sale in the perpetual inventory system

Date	Accounts and Explanation	Debit ($)	Credit ($)
	Cash/Accounts receivable	XXX
	Sales revenue		XXX
	(To record the sale of goods)
	Cost of goods sold	XXX
	Inventory		XXX
	(To record the cost of goods sold)