Under a periodic inventory system, what is the journal entry to record the purchase of merchandise inventory on credit?

Under a periodic inventory system, what is the journal entry to record the purchase of merchandise inventory on credit?

• A. Debit Accounts Payable; Credit Merchandise Inventory
• B. Debit Merchandise Inventory; Credit Cash
• C. Debit Cash; Credit Merchandise Inventory
• D. Debit Merchandise Inventory; Credit Accounts Payable

Answer: (D)

In a periodic inventory system, purchases are tracked in a Purchases account rather than directly in the Inventory account. When the purchase is made on credit, you increase Accounts Payable to reflect the obligation and record the cost in Purchases. So the typical entry is Debit Purchases; Credit Accounts Payable. The option that debits Merchandise Inventory would be correct only in a perpetual system, where Inventory is updated at the time of purchase. In a periodic system, Inventory isn’t adjusted at purchase—the Purchases account is. At period end, you’ll transfer Purchases to Cost of Goods Sold and adjust Inventory to determine the final COGS.

In a periodic inventory system, purchases are tracked in a Purchases account rather than directly in the Inventory account. When the purchase is made on credit, you increase Accounts Payable to reflect the obligation and record the cost in Purchases. So the typical entry is Debit Purchases; Credit Accounts Payable.

The option that debits Merchandise Inventory would be correct only in a perpetual system, where Inventory is updated at the time of purchase. In a periodic system, Inventory isn’t adjusted at purchase—the Purchases account is. At period end, you’ll transfer Purchases to Cost of Goods Sold and adjust Inventory to determine the final COGS.