Which of the following accounts are used when recording a...

Which of the following accounts are used when recording a purchase using a periodic inventory system?
A. cash, purchases
B. accounts payable, sales
C. accounts payable, accounts receivable
D. cash, merchandise inventory

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Key Concepts

Purchases Account

In a periodic inventory system, the Purchases account is used to record the cost of inventory acquired during the period. Instead of directly adjusting the merchandise inventory account with each transaction, the purchases are recorded separately and later used in conjunction with beginning and ending inventory figures to determine the cost of goods sold.

Periodic Inventory System

A periodic inventory system is an accounting method where inventory levels and cost of goods sold are updated only at the end of an accounting period rather than with every individual purchase or sale. This system uses temporary accounts to record purchases and other inventory-related transactions during the period, with adjustments made afterward to reflect actual inventory levels.

Cash and Accounts Payable

When recording a purchase, the method of payment is accounted for either as a cash transaction (if the purchase is paid for immediately) or through accounts payable (if the purchase is made on credit). Recognizing the proper account ensures that the cash or liability balances accurately reflect the company's financial obligations and liquidity.

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