PRC-1 · Chapter 7 · Question 18 of 100
An entity uses a perpetual inventory system. Which TWO journal entries are simultaneously required to record a sale of goods on credit?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Debit Receivables, Credit Sales AND Debit Cost of Sales, Credit Inventory
Explanation
In a perpetual system, every sale requires recognizing the revenue (Debit Receivables, Credit Sales) and immediately updating the inventory records by removing the goods sold (Debit Cost of Sales, Credit Inventory).
More IAS 2: Inventories MCQs
- Q20Which of the following items is EXCLUDED from the scope of IAS 2 Inventories?
- Q21A business bought 30 cars. Under which of the following circumstances would these cars be classified as 'Inventory'?
- Q22Which of the following definitions correctly describes 'Prime Cost'?
- Q23When a business records a write-down of inventory to Net Realizable Value, where is this expense initially recognized?
- Q24If an entity accidentally overstates its closing inventory value, what is the direct impact on the financial statements for that year?