perpetual and periodic inventory

Question 1

perpetual

What if Company A buys something on account from Company B?

Answer 1

Company A debits inventory and credits accounts payable

Question 2

perpetual

What if Company A incurs freight costs?

Answer 2

Company A debits inventory and credits cash

Question 3

perpetual

What if Company B incurs freight costs?

Answer 3

Company B debits freight-out/delivery expense and credits cash

Question 4

perpetual

What if Company A returns something to Company B?

Answer 4

Company A debits accounts payable and credits inventory

Question 5

perpetual

What if Company A pays within the discount period?

Answer 5

Company A debits accounts payable, credits inventory for the discount amount, and credits cash for the remainder

Question 6

perpetual

What if Company A just makes a full payment?

Answer 6

Company A debits accounts payable and credits cash

Question 7

perpetual

What if Company B makes a sale on credit?

Answer 7

Company B debits accounts receivable and credits sales revenue. Then Company B also debits COGS and credits inventory

Question 8

perpetual

What if Company B receives a return?

Answer 8

Debits sales returns and allowances and credits accounts receivable. Then Company B also debits inventory and credits COGS

Question 9

perpetual

What if Company B does not receive a return but grants Company A an allowance (reduces the purchase price?)

Answer 9

Company B debits sales returns and allowances and credits accounts receivable
doesn’t affect COGS

Question 10

perpetual

What if Company B receives payment for a purchase with a sales discount?

Answer 10

Company B debits sales discounts, debits cash for the remaining amount, and credits accounts receivable

Question 11

periodic

What if Company A buys something on account from Company B?

Answer 11

Debit purchases, credit accounts payable

Question 12

periodic

What if Company A incurs freight costs?

Answer 12

Debit freight-in, credit cash

Question 13

periodic

What if Company A returns something to Company B?

Answer 13

Debit accounts payable, credit purchase returns and allowances

Question 14

periodic

What if Company A pays within the discount period?

Answer 14

Debit accounts payable, credit purchase discounts, credit cash for the remaining amount

Question 15

periodic

What if Company B makes a sale on credit?

Answer 15

Debit accounts receivable, credit sales revenue

no entry for COGS

Question 16

periodic

What if Company B receives a return?

Answer 16

Debit sales returns and allowances, credit accounts receivable
No entry for COGS

Question 17

periodic

What if Company B receives payment within the discount period?

Answer 17

Debit sales discounts, debit cash for the remaining amount, credit accounts receivable