Question

A merchandiser purchased inventory on account for $18,000. under the periodic inventory system, the journal entry to record the purchase would include ________.
a. a debit to accounts payable for $18,000 and a credit to purchases for $18,000
b. a debit to accounts payable for $18,000 and a credit to merchandise inventory for $18,000
c. a debit to merchandise inventory for $18,000 and a credit to accounts payable for $18,000
d. a debit to purchases for $18,000 and a credit to accounts payable for $18,000

Answer 1

The correct answer for this question is letter D. It must be debited to purchases and credited to accounts payable. Asset increases so it must be debited and the purchases is the account title used in periodic inventory system while merchandise inventory is used in the perpetual inventory system. And it is credited to accounts payable because there is an increase in our account and this is the normal side of accounts payable.