The document compares the periodic and perpetual inventory methods for recording purchases and sales transactions in the buyer's and seller's books. Under the periodic method, inventory purchases and sales are recorded only when invoices are paid or received. The perpetual method records inventory increases and decreases immediately with each transaction to maintain a running inventory balance. Both methods are illustrated by example transactions for purchases on credit terms, returns, payment of expenses, and settlement of accounts payable and receivable.
The document compares the periodic and perpetual inventory methods for recording purchases and sales transactions in the buyer's and seller's books. Under the periodic method, inventory purchases and sales are recorded only when invoices are paid or received. The perpetual method records inventory increases and decreases immediately with each transaction to maintain a running inventory balance. Both methods are illustrated by example transactions for purchases on credit terms, returns, payment of expenses, and settlement of accounts payable and receivable.
The document compares the periodic and perpetual inventory methods for recording purchases and sales transactions in the buyer's and seller's books. Under the periodic method, inventory purchases and sales are recorded only when invoices are paid or received. The perpetual method records inventory increases and decreases immediately with each transaction to maintain a running inventory balance. Both methods are illustrated by example transactions for purchases on credit terms, returns, payment of expenses, and settlement of accounts payable and receivable.
The document compares the periodic and perpetual inventory methods for recording purchases and sales transactions in the buyer's and seller's books. Under the periodic method, inventory purchases and sales are recorded only when invoices are paid or received. The perpetual method records inventory increases and decreases immediately with each transaction to maintain a running inventory balance. Both methods are illustrated by example transactions for purchases on credit terms, returns, payment of expenses, and settlement of accounts payable and receivable.
Jan 1: Purchase of Inventory on Credit at Jan 1: Purchase of Inventory on Credit at 1,00,000 Taka (3/12, N/45): 1,00,000 Taka (3/12, N/45): Purchase Account Dr – 1,00,000 Inventory Account – Dr 1,00,000 Accounts Payable Cr – 1,00,000 Accounts Payable Cr – 1,00,000 Jan 1: Payment of Wages 5000, Freight In 3000 Jan 1: Payment of Wages 5000, Freight In 3000 and Import Duty 2000: and Import Duty 2000: Wages Account Dr – 5000 Freight In Account Dr – 3000 Inventory Account Dr – 10,000 Import Duty Account Dr - 2000 Cash Account Cr – 10,000 Cash Account Cr – 10,000 Jan 3: Purchase Return 20,000 Taka: Jan 3: Purchase Return 20,000 Taka: Accounts Payable Account Dr – 20,000 Accounts Payable Account Dr – 20,000 Purchase Return Account Cr – 20,000 Inventory Account Cr – 20,000 Jan 10: The remaining balance of A/P has been Jan 10: The remaining balance of A/P has been settled: settled: Accounts Payable Account Dr – 80,000 Accounts Payable Account Dr – 80,000 Purchase Discount Account Cr - 2400 Inventory Account Cr - 2400 Cash Account Cr – 77,600 Cash Account Cr – 77,600 Seller’s Book Periodic Method Perpetual Method Jan 1: Sales of goods on credit at 1,00,000 Taka. Jan 1: Sales of goods on credit at 1,00,000 Taka. (3/12, EOM), The CoGS is 80,000 Taka: (3/12, EOM), The CoGS is 80,000 Taka: Accounts Receivable Account Dr – 1,00,000 Accounts Receivable Account Dr – 1,00,000 Sales Revenue Accounts Cr – 1,00,000 Sales Revenue Accounts Cr – 1,00,000 Cost of Goods Sold Account – Dr 80,000 Inventory Account Cr – 80,000 Jan 1: Freight Out paid 2000 Taka: Jan 1: Freight Out paid 2000 Taka: Freight Out Account Dr – 2000 Freight Out Account Dr – 2000 Cash Accounts Cr – 2000 Cash Accounts Cr – 2000 Jan 3: Sales Return at 20,000 Taka: Jan 3: Sales Return at 20,000 Taka: Sales Return Account Dr – 20,000 Sales Return Account Dr – 20,000 A/R Accounts Cr – 20,000 A/R Accounts Cr – 20,000 Inventory Accounts Dr – Cost of Goods Sold Cr - Feb 9: Settlement of A/R: Feb 9: Settlement of A/R: Cash Account Dr – 77,600 Cash Account Dr – 77,600 Sales Discount Account Dr - 2400 Sales Discount Account Dr - 2400 A/R Accounts Cr – 80,000 A/R Accounts Cr – 80,000