Question

If Yasai purchased and received 100 bags of noodles before the year end, if no payment has been made, how should this be represented in the current 2019 accounting period? I.E. For the year ending 31 December 2019.

Answer 1

Answer:

the journal entry to record this transaction is:

Dr Merchandise inventory XY

    Cr Accounts payable XY

Since Yasai received the merchandise before the year ended, it must report this transaction by increasing both current assets (merchandise inventory) and current liabilities (accounts payable).

Under accrual accounting, transactions are recorded once they occur, and not necessarily when cash is exchanged. In this specific case, the company received an asset and it must pay for it at a later date.