PRC-1 · Chapter 7 · Question 4 of 100
Which of the following statements correctly distinguishes between the periodic and perpetual inventory systems?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Under the perpetual system, purchases are debited directly to the Inventory account rather than a Purchases account.
Explanation
In a perpetual system, the Inventory account is continuously updated for additions (purchases) and reductions (sales). In a periodic system, purchases are recorded in a separate Purchases account and inventory is only updated at period-end after a physical count.
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