When entering inventory transactions under the perpetual inventory system, which account is debited when inventory is purchased for cash?

• A. Sales Revenue
• B. Inventory
• C. Cost of Goods Sold
• D. Accounts Payable

Answer: (B)

Verified step by step guidance

1. Understand the perpetual inventory system: In this system, inventory accounts are continuously updated to reflect purchases and sales. This means that every transaction involving inventory directly affects the inventory account.
2. Identify the nature of the transaction: The problem states that inventory is purchased for cash. This indicates that the company is acquiring inventory and paying for it immediately, rather than on credit.
3. Determine the account to be debited: When inventory is purchased, the Inventory account is debited to reflect the increase in the company's assets (inventory). This is because inventory is an asset, and debiting the account increases its balance.
4. Consider the account to be credited: Since the purchase is made for cash, the Cash account is credited to reflect the decrease in the company's cash balance. This is the corresponding entry in the transaction.
5. Review the options provided: Among the options, 'Inventory' is the correct account to be debited, as it directly reflects the increase in inventory due to the purchase. The other options (Sales Revenue, Cost of Goods Sold, Accounts Payable) are not relevant to this specific transaction.