PRC-1 · Chapter 7 · Question 13 of 100
What is the correct journal entry for stock distributed as free charity under a periodic inventory system?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Debit Charity Expense; Credit Purchases
Explanation
In a periodic system, inventory accounts are not continuously updated. Goods taken out for non-sale purposes (like charity or drawings) are credited to the Purchases account to remove their cost from the calculation of Cost of Sales.
More IAS 2: Inventories MCQs
- Q15A business calculates the value of its closing stock on an item-by-item basis: Item A: Cost 95,000; NRV 93,000. Item B: Cost 100,000; NRV…
- Q16Which of the following expenditures should be included in the capitalized cost of inventory?
- Q17Which of the following scenarios describes a situation where a perpetual inventory system would be MOST suitable?
- Q18An entity uses a perpetual inventory system. Which TWO journal entries are simultaneously required to record a sale of goods on credit?
- Q19According to IAS 2, how should unallocated fixed production overheads be treated when actual production is abnormally low?