Which accounts would not be closed by a merchandising entity that uses the perpetual inventory system?
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Option (d): Under the perpetual inventory system, at the end of the period, all the temporary accounts will be closed by transferring the balance to the profit and loss summary account.
What are the closing entries in a perpetual inventory system?Closing Entries (Periodic)
In the perpetual inventory system, the Merchandise Inventory account is continuously updated and is adjusted at the end of the accounting period based on a physical inventory count.
What are the accounts used in merchandising businesses using perpetual inventory system?Journal entries in a perpetual inventory system:
The sale involves two journal entries – one to record the sale which is the same as made under periodic inventory system and one to transfer the cost of inventory from inventory account to cost of goods sold (COGS) account.
Why are merchandising accounts closed?A business uses closing entries to close out revenue and expense accounts, including the merchandising accounts of cost of goods sold and supplies expense. Revenue and expense are periodic business results, and must be reset to zero in the general ledger to be ready for recording in the next accounting period.
What is perpetual inventory merchandise?Perpetual inventory is a method of accounting for inventory that records the sale or purchase of inventory immediately through the use of computerized point-of-sale systems and enterprise asset management software.
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