a store purchased 500 in merchandise on account.using the periodic inventry system,how would you record your entry?
(a)debit merchandise inventory 500 and credit accounts payable 500
(b)credit purchase 500 and debit accounts payable 500
(c)credit merchandise inventory 500
and debit accounts payable 500
(d)debit purchase 500 and credit accounts payable 500
my answer is
a
Your answer is correct! To record the entry for a store purchasing $500 worth of merchandise on account using the periodic inventory system, you would debit the Merchandise Inventory account for $500 and credit the Accounts Payable account for $500.
Here's how you can explain your answer:
To record the purchase of merchandise on account, we need to update both the Merchandise Inventory account and the Accounts Payable account.
1. Debit Merchandise Inventory: By debiting the Merchandise Inventory account, we increase the value of the inventory on hand. This reflects the fact that the store now has an additional $500 worth of merchandise to sell.
2. Credit Accounts Payable: By crediting the Accounts Payable account, we show that the store owes $500 to its supplier. This reflects the fact that a liability has been created as a result of the purchase on account.
So, in this case, option (a), where you debit Merchandise Inventory for $500 and credit Accounts Payable for $500, is the correct entry to record the transaction.