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How are purchase discounts and purchase returns recorded by a company using the periodic inventory system?
Wiki User
∙ 9y ago
They are recorded as a direct reduction to the Purchases account.
Wiki User
∙ 9y ago
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Definition of purchases account?
Ledger account in which all inventory purchases are recorded; used generally with periodic inventory method
What is the difference between periodic inventory and perpetual inventory?
Periodic inventory method calculate ending stock at the end of the accounting period, which could be Month to Date or Year to Date, while Perpetual inventory system calculates the ending stock on a continuous basis after each transaction (Purchase or Sell). Within Retail industry, periodic inventory method used for inventory valuation at the stores, whereas distributer like SuperValu (in US) follows perpetual inventory method to track inventory in their distribution centers. As a best practice, some of the retail companies are using perpetual accounting method to track inventory available in warehourses and distribution centers. In an idealistic world, perpetual inventory method can provide the true and real time inventory information, however due to complexities in consolidating all the purchases, sales, shrinkages and other market factors, it is advisable for retail companies to follow periodic accounting method to analyze and review the results before presenting the inventory valuation results to internal and external agencies like Shareholders, Income Tax Authorities, et el.
Is inventory shrinkage recorded as an expense?
As a reduction to merchandise inventory
In a perpetual inventory system a return of defective merchandise by a purchaser is recorded by crediting what?
inventory
Assets purchased for resale are recorded in which of the following accounts?
Merchandise Inventory
Definition of purchases account?
Ledger account in which all inventory purchases are recorded; used generally with periodic inventory method
What is the difference between periodic and perpitual inventory system?
Periodic Inventory System Inventory account and cost of goods sold are non-existent until the physical count at the end of the year. Purchases account is used to record purchases. Purchase Return account is used to record Purchases Returns account. Cost of goods sold or cost of sale is computed from the ending inventory figure For goods returned by customers there are no inventory entries. Perpetual Inventory System Account and the balance of costs of goods sold and inventory account exist all the time. No individual purchases account but the purchases are recorded in the Inventory Account. No individual Purchase Returns account but the purchases return are recorded in the Inventory Account. Record cost of goods sold/cost of sale - inventory is reduced when there is a sale. Returns from customers are recorded by reducing the cost of goods sold and adding back into inventory.
What is the difference between periodic inventory and perpetual inventory?
Periodic inventory method calculate ending stock at the end of the accounting period, which could be Month to Date or Year to Date, while Perpetual inventory system calculates the ending stock on a continuous basis after each transaction (Purchase or Sell). Within Retail industry, periodic inventory method used for inventory valuation at the stores, whereas distributer like SuperValu (in US) follows perpetual inventory method to track inventory in their distribution centers. As a best practice, some of the retail companies are using perpetual accounting method to track inventory available in warehourses and distribution centers. In an idealistic world, perpetual inventory method can provide the true and real time inventory information, however due to complexities in consolidating all the purchases, sales, shrinkages and other market factors, it is advisable for retail companies to follow periodic accounting method to analyze and review the results before presenting the inventory valuation results to internal and external agencies like Shareholders, Income Tax Authorities, et el.
Is inventory shrinkage recorded as an expense?
As a reduction to merchandise inventory
In a perpetual inventory system a return of defective merchandise by a purchaser is recorded by crediting what?
inventory
Inventory shortage is recorded when?
merchandise is returned to seller
Is inventory reported at cost or retail for balance sheet reporting?
Inventory is recorded at the lower of cost or market value.
Assets purchased for resale are recorded in which of the following accounts?
Merchandise Inventory
Does consignment stock have to be reported as inventory?
Yes, consignment stock must be recorded and reported. It is a non-asset inventory and must be documented.
What is the inventory system in accounting?
Inventory system is more likely recorded in the Balance Sheet section in accounting. It will not be at the Profit and Loss section.
How does a company that uses the perpetual inventory system determine the amount of inventory shrinkage?
By taking a physical count. They will take their recorded amount and subtract the physical count to analyze inventory shrinkage.
What is inventory variance?
An inventory variance report shows the difference between previous recorded inventory quantity and correct inventory quantity which is discovered immediately after a physical count. It also reports on the value difference the quantity variances caused.
