when the perpetual inventory system is used, in what account are purchases recorded? in what account are purchases recorded when the periodic inventory system is used?
When the perpetual inventory system is used, in what account are purchases recorded? In what account are purchases recorded when the periodic inventory system is used?
Perpetual Inventory System:
When the perpetual inventory system is used, purchases are recorded in the “Inventory” account. In this system, each purchase of inventory items is immediately recorded in the Inventory account, allowing for real-time tracking of inventory levels and cost of goods sold.
Periodic Inventory System:
In contrast, when the periodic inventory system is used, purchases are not directly recorded in an account dedicated to purchases. Instead, purchases are recorded in temporary accounts such as “Purchases” or “Purchases Account.” In this system, the cost of goods sold is calculated periodically at the end of the accounting period by subtracting the ending inventory from the sum of beginning inventory and purchases.