PRC-1 · Chapter 7 · Question 12 of 100
What is the correct journal entry for stock distributed as free charity under a perpetual inventory system?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Debit Charity Expense; Credit Inventory
Explanation
Under a perpetual system, the physical removal of goods for any reason directly reduces the Inventory account. The value of the goods given away is recognized as a Charity Expense.
More IAS 2: Inventories MCQs
- Q14Which of the following correctly describes 'over-absorption' of production overheads?
- 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?