Under a periodic inventory system, purchases are:

• A. Immediately debited to the Inventory account.
• B. Recorded as an expense when purchased.
• C. Not recorded until the goods are sold.
• D. Recorded in a Purchases account and not directly added to Inventory until period-end.

Answer: (D)

Verified step by step guidance

1. Understand the periodic inventory system: In this system, inventory updates are not made continuously. Instead, inventory is updated at the end of the accounting period.
2. Recognize the role of the Purchases account: Under the periodic inventory system, purchases of inventory are recorded in a separate Purchases account rather than directly adjusting the Inventory account.
3. Clarify the timing of inventory updates: Inventory is not updated immediately when goods are purchased. Instead, the Purchases account accumulates the cost of goods purchased during the period.
4. Learn the period-end adjustment process: At the end of the accounting period, the balance in the Purchases account is used to calculate the cost of goods sold (COGS) and update the Inventory account.
5. Understand the distinction from perpetual inventory systems: Unlike the periodic system, a perpetual inventory system updates the Inventory account immediately with each purchase or sale, providing real-time inventory tracking.