Question

2. Give a detailed example of the recording of purchases under a perpetual inventory system including returns, allowances and discounts. 3. Give a detailed example of the recording sales revenues under a perpetual inventory system including returns, allowances and discounts. 4. Give a detailed example of the recording of purchases under a periodic inventory system including returns, allowances and discounts. 5. Give a detailed example of the recording sales revenues under a periodic inventory system including returns, allowances and discounts.

Answer 1

1)under perpetual inventoy system a purchase is recorded by debiting inventory account and crediting account payable assuming that the purchase is on credit,the journal entry is shown below

inventroy a/c dr

to account payable

Purchase discount

account payable a/c dr

to inventory

Purchase Return

Acoount Payable a/c dr

to inventory

2)A transaction of sale is recorded via two journal entry in perpetul inventory system,the 1st one records the sale value of inventory and 2nd one records the cost of good sold andreduces the inventory balances

Account receivables A/c dr

to sales

Cost of goods sold A/c dr

to Inventroy

Sales Return:

Sales return a/c Dr

to account receivables

and

inventory a/c dr

to cost of good sold

3)