PRC-1 · Chapter 7 · Question 63 of 100
Yousuf flour mills gave 1,600 bags of flour to a poor community as a donation. What is the correct journal entry to record this transaction under a perpetual inventory method?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) Debit Donation Expense & Credit Inventory
Explanation
In a perpetual system, the physical removal of goods for any reason (including charity/donation) directly reduces the Inventory account, and the cost is recognized as the relevant expense.
More IAS 2: Inventories MCQs
- Q65What does the term 'Prime Cost' represent in a manufacturing environment?
- Q66Which of the following equations correctly calculates the Cost of Goods Manufactured?
- Q67Which of the following situations describes 'over-absorbed' overheads?
- Q68What is the correct journal entry to adjust for 'over-absorbed' production overheads at the end of the period?
- Q69When using the continuous Weighted Average Cost (AVCO) formula under a perpetual inventory system, when must a new average unit cost be…