Answer to Question #104805 in Accounting for Nad Etaraz

Question

What does it mean if both entries for a merchandiser's sale transaction (the sale, and the removal of the sold item from inventory) are recorded for the same dollar amount?

Answer 1

Under perpetual or an unending framework, purchases are recorded straightforwardly in the the inventory record as charges to that advantage account. Returns are recorded as credits to stock. At the point when stock is sold, the deal exchange is recorded, yet another exchange is recorded at the same time to move the expense of that stock to a business ledger called cost of products sold. The outcome is that the product stock record is kept up constantly, that is, interminably. Toward the finish of the bookkeeping time frame, a physical check of stock is as yet taken and is contrasted with the product stock general record account. The distinction between the two is recorded as a charge to stock shrinkage cost and an a worthy representative for stock. The unending framework, consequently, permits the organization to screen the amount of the stock is lost because of burglary, breakage, or such.