![]() ![]() Account Debit Credit Inventory (Ending Balance) 000 Cost of Goods Sold 000 Inventory (Beginning Balance) 000 Purchase (total purchase during the month) 000 Perpetual Inventory System Purchase amount is the total purchase during the month, we need to reverse it to zero as we already recognize ending inventory. Beginning inventory is the amount broughforward from prior month, it needs to credit as we already record ending inventory. Cost of goods sold is calculated base on above formula, and it will present on the income statement. Ending inventory depend on the actual count which will present in the balance sheet. Month-end journal entries: At the end of the month, company need to debit inventory, cost of goods sold and credit beginning inventory & total purchase during the month. Account Debit Credit Sale Return 000 Accounts Receivable 000 Sale Return: If customer return the products for any reasons, we need to debit sale return and credit accounts receivable. Account Debit Credit Sale Discounted 000 Accounts Receivable 000 Sale Discount: When company provide sale discount to customer, they need to debit sale discount and credit accounts receivable. Account Debit Credit Accounts Receivable 000 Sale 000 Inventory Sale: When company makes sale, they need to debit accounts receivable and credit sale. Account Debit Credit Accounts Payable 000 Purchase Return 000 Purchase return: If there is purchase return, company need to debit accounts payable and credit purchase return. Account Debit Credit Accounts Payable 000 Purchase Discount 000 Purchase discount: The company needs to make journal entry by debit accounts payble and credit purchase discount. Account Debit Credit Purchase 000 Accounts Payable 000 Purchase account is the temporary account under inventory which will be reverse in next journal entry. Purchase inventory from a supplier on credit: when company purchase inventory, we have to debit purchase accounts and credit accounts payable. We will use the valuation methods such as FIFO, LIFO, and Weighted average. ![]() To calculate the valuation of goods sold, it will be a problem when the cost we spend changes over time. This formula only uses to make assumptions and calculate the quantity of inventory being sold. This system will account for those items as sold. However, if the items are not sold, but they are broken or stolen. It makes sense when we look at the formula, the beginning balance plus new purchase less ending must result as the sold item. ![]() Total Inventory Cost – Ending Inventory Balance = Cost of Goods SoldĬost of Goods Sold = Beginning Balance + New Purchase – Ending Inventory Balance Beginning Balance + New Purchase = Total Inventory Cost ![]()
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