Lesson 5: Accounting For Inventory

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  • 1/5 Questions

    I t is the second to the last step in a flow of Bookkeeping Record that uses the information from the General Ledger to summarize the data to use for preparing the Financial Statements.

    • Special Journals
    • General Ledger
    • Trial Balance and Work Sheets
    • Financial Statements
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Lesson 5: Accounting For Inventory - Quiz
About This Quiz

LESSON 5: ACCOUNTING FOR INVENTORY focuses on comparing Perpetual and Periodic Inventory Systems through transaction entries and adjustments. It also covers steps in bookkeeping records leading to the preparation of financial statements, enhancing skills in inventory accounting.

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  • 2. 

    I t is the last step in a flow of Bookkeeping Record that uses the summarized data contained in the Trial Balance to prepare the business's financial reports .

    • Special Journals

    • General Ledger

    • Subsidiary Ledgers

    • Financial Statements

    Correct Answer
    A. Financial Statements
    Explanation
    The correct answer is Financial Statements. The last step in a flow of Bookkeeping Record is to prepare the business's financial reports, which are known as financial statements. These statements provide a summary of the company's financial performance and position, including the income statement, balance sheet, and cash flow statement. They are crucial for decision-making and assessing the overall financial health of the business.

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  • 3. 

    To differentiate the Perpetual and Periodic Inventory System, what is the entry made for doing the transaction under purchasing a product.

    • UNDER PERIODIC METHOD- Debit Purchases Account UNDER PERPETUAL METHOD- Debit Inventory Control Account UNDER PERPETUAL METHOD- Debit Inventory Control Account

    • UNDER PERIODIC METHOD- Credit Sales Account UNDER PERPETUAL METHOD- Credit Sales Account

    • UNDER PERIODIC METHOD- Cost of Goods Sold and Reduce Inventory Value UNDER PERPETUAL METHOD- Credit Inventory Control Account

    • UNDER PERIODIC METHOD- Credit Purchases Account UNDER PERPETUAL METHOD- No Adjusting Entries Needed Cost Of Goods and Reduce Inventory Value

    Correct Answer
    A. UNDER PERIODIC METHOD- Debit Purchases Account UNDER PERPETUAL METHOD- Debit Inventory Control Account UNDER PERPETUAL METHOD- Debit Inventory Control Account
    Explanation
    Under the periodic inventory method, the entry made for purchasing a product is to debit the Purchases Account. This account is used to record the cost of goods purchased during a specific period.

    Under the perpetual inventory method, the entry made for purchasing a product is to debit the Inventory Control Account. This account is used to track the quantity and value of inventory on hand at any given time. By debiting this account, the company increases the value of inventory on the balance sheet.

    The repeated entry of "Debit Inventory Control Account" for the perpetual method may be a mistake, as it contradicts the correct answer.

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  • 4. 

    Examples of these are Cash Receipts, Cash Disbursements, Sales Purchases, Payroll, General Journal,  etc. that uses the information from the source documents to create a chronological listing of all business transactions and detailed information about each transaction.  

    • Special Journals

    • General Ledger

    • Trial Balance and Work Sheets

    • Financial Statements

    Correct Answer
    A. Special Journals
    Explanation
    Special Journals are used to record specific types of transactions, such as cash receipts, cash disbursements, sales, purchases, payroll, and general journal entries. These journals provide a chronological listing of all business transactions and include detailed information about each transaction. The use of special journals helps to organize and streamline the recording process, making it easier to track and analyze transactions.

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  • 5. 

    To differentiate the Perpetual and Periodic Inventory System, what is the entry made for doing the transaction under Adjusting entries a product.

    • UNDER PERIODIC METHOD- Sale of Product- No Entry Made To Record UNDER PERPETUAL METHOD- Debit Cost Of Goods Sold

    • UNDER PERIODIC METHOD- Debit Inventory Account UNDER PERPETUAL METHOD- No Adjusting Entries Needed To Record Cost of Goods Sold and Adjust Ending Inventory

    • UNDER PERIODIC METHOD- Sale of Product- No Entry Made To Record UNDER PERPETUAL METHOD- Debit Inventory Control Account

    • UNDER PERIODIC METHOD- Debit Inventory Account UNDER PERPETUAL METHOD- Credit Inventory Control Account

    Correct Answer
    A. UNDER PERIODIC METHOD- Debit Inventory Account UNDER PERPETUAL METHOD- No Adjusting Entries Needed To Record Cost of Goods Sold and Adjust Ending Inventory
    Explanation
    Under the periodic inventory system, there is no entry made to record the sale of a product. Instead, the inventory account is debited to reflect the decrease in inventory. On the other hand, under the perpetual inventory system, the cost of goods sold is debited to record the expense and the decrease in inventory, and no adjusting entries are needed to record the cost of goods sold and adjust the ending inventory. Therefore, the correct answer is that under the periodic method, the entry made for the transaction is to debit the inventory account.

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  • Mar 21, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Mar 23, 2010
    Quiz Created by
    Lyza
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