Concord Company buys merchandise on account from Pharoah Company. The selling price of the goods...
Question:
Concord Company buys merchandise on account from Pharoah Company. The selling price of the goods is $790, and the cost of the goods is $470. Both companies use perpetual inventory systems.
Journalize the transaction on the books of both companies.
Perpetual Inventory Method:
Perpetual inventory method is an inventory method which updates the inventory of the company from time to time, meaning, when there are purchases, sales, or even purchase returns, the inventory is automatically updated. This is because the recording of purchases, purchase returns and discounts are made in one account - the merchandise inventory account.
Answer and Explanation: 1
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View this answerPharoah Company (Seller's books)
| Account titles | Debit | Credit |
|---|---|---|
| Accounts receivable | 790 | |
| Sales | 790 | |
| To record the sales on account | ||
| ... |
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Perpetual Inventory System: Definition, Advantages & Examples
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Chapter 1 / Lesson 15
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Learn about the perpetual inventory system and how it is used. Explore the advantages of perpetual inventory systems and compare perpetual vs. periodic inventory.
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