Introduction to accounting

1.4 Summary of journal entries under each system

Periodic inventory Perpetual inventory

Entry
method method
Opening inventory Closing inventory as Closing balance on the
measured and inventory account as at
recognised brought the end of the previous
forward from last period period
Purchase of inventory Dr Purchases Dr Inventory
Cr Payables/cash Cr Payables/cash
Freight paid Dr Carriage inwards Dr Inventory
Cr Payables/cash Cr Payables/cash
Return of inventory to Dr Payables Dr Payables
supplier Cr Purchase returns Cr Inventory
Sale of inventory Dr Receivables Dr Receivables
Cr Sales Cr Sales
and
Dr Cost of goods sold
Cr Inventory
Return of goods by a Dr Sales returns Dr Sales returns
supplier Cr Receivables Cr Receivables
and
Dr Inventory
Cr Cost of goods sold
Normal loss No double entry Dr Cost of goods sold
Cr Inventory
Abnormal loss Dr Abnormal loss Dr Abnormal loss
Cr Purchases Cr Inventory
Closing inventory Counted, valued and Balance on the inventory
recognised by: account
Dr Inventory (statement
of financial position)
Cr Cost of sales (cost
of goods sold)

© Emile Woolf International 204 The Institute of Chartered Accountants of Pakistan