Question

Abbott Company purchased $6,500 of merchandise inventory on account. Advent uses the perpetual inventory method. Which of the following entries would be required to record this transaction?
a. Cost of Goods Sold 6,500 Accounts Payable 6,500
b. Inventory 6,500 Accounts Payable 6,500
c. Accounts Payable 6,500 Purchases 6,500
d. Accounts Payable 6,500 Inventory 6,500

Answer 1

Answer:

The correct answer is b. Inventory 6,500 Accounts Payable 6,500

Explanation:

In accounting, an account payable is any contribution from a debtor party, which appears as a result of a purchase of goods or services in terms of credit, to a creditor party.

Even if a legal person makes a purchase without issuing the intention to pay in writing, it records the amount due as a current obligation in their accounts. Companies often incur this type of short-term debit in order to pay for their inventories, especially in industries where inventory performance is accelerated.