{"id":199,"date":"2024-09-06T16:47:25","date_gmt":"2024-09-06T16:47:25","guid":{"rendered":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/chapter\/purchases-under-a-perpetual-system\/"},"modified":"2024-09-11T19:11:36","modified_gmt":"2024-09-11T19:11:36","slug":"purchases-under-a-perpetual-system","status":"publish","type":"chapter","link":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/chapter\/purchases-under-a-perpetual-system\/","title":{"raw":"Purchases under a Perpetual System","rendered":"Purchases under a Perpetual System"},"content":{"raw":"<section class=\"textbox learningGoals\" aria-label=\"Learning Goals\">\r\n<ul>\r\n \t<li>Record Purchases under a perpetual system<\/li>\r\n<\/ul>\r\n<\/section>&nbsp;\r\n\r\nIn previous sections, we\u2019ve been using the periodic system to record Bryan Wholesale Co. and Geyer, Co. transactions. Let\u2019s continue to use the same companies and record this invoice using a perpetual system for Geyer, Co.:\r\n\r\n[caption id=\"attachment_5420\" align=\"aligncenter\" width=\"670\"]<a href=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5107\/2020\/10\/09173012\/Screen-Shot-2020-11-09-at-9.28.51-AM.png\"><img class=\"wp-image-5420 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5107\/2020\/10\/09173012\/Screen-Shot-2020-11-09-at-9.28.51-AM.png\" alt=\"See the caption for the long description.\" width=\"670\" height=\"739\" \/><\/a> See the <a href=\"https:\/\/docs.google.com\/document\/d\/1m8DW0MlHb0twBhUBrXBmHM1_5rZkSDPOkL3YtMKOGYc\/edit?usp=sharing\" target=\"_blank\" rel=\"noopener\">invoice long description<\/a> here.[\/caption]\r\n<table class=\"fin-table gridded\"><caption class=\"u-clearfix\"><span style=\"text-transform: uppercase;\">Journal<\/span><span style=\"float: right;\">Page 101<\/span><\/caption>\r\n<thead>\r\n<tr aria-hidden=\"true\">\r\n<td colspan=\"5\"><\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"col\">Date<\/th>\r\n<th scope=\"col\">Description<\/th>\r\n<th scope=\"col\">Post. Ref.<\/th>\r\n<th scope=\"col\">Debit<\/th>\r\n<th scope=\"col\">Credit<\/th>\r\n<\/tr>\r\n<\/thead>\r\n<tbody>\r\n<tr>\r\n<td>20XX<\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Dec 19<\/th>\r\n<td>Merchandise Inventory<\/td>\r\n<td class=\"r\"><\/td>\r\n<td class=\"r\">20,700.00<\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<th><span class=\"u-sr-only\">Dec 19<\/span><\/th>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Accounts Payable<\/td>\r\n<td><\/td>\r\n<td class=\"r\"><\/td>\r\n<td class=\"r\">20,700.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<th><span class=\"u-sr-only\">Dec 19<\/span><\/th>\r\n<td>To record purchase of XPS-101 from Bryan Whls 200 count<\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr aria-hidden=\"true\">\r\n<td colspan=\"5\"><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\nThis invoice looks logical and simple, and it is, except we also have to keep a subsidiary ledger listing all the items in stock and the assigned cost. The subsidiary ledger might look something like this:\r\n<div align=\"left\">\r\n<table class=\"fin-table gridded\"><caption>Inventory List<\/caption>\r\n<tbody>\r\n<tr>\r\n<td style=\"text-align: left;\" colspan=\"5\"><strong>Geyer, Co.<\/strong><\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"text-align: right;\" colspan=\"5\"><strong>12\/19\/20XX<\/strong><\/td>\r\n<\/tr>\r\n<tr aria-hidden=\"true\">\r\n<td colspan=\"5\"><\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"col\">Product ID<\/th>\r\n<th scope=\"col\">Description<\/th>\r\n<th scope=\"col\">Unit Cost<\/th>\r\n<th scope=\"col\">Quantity in Stock<\/th>\r\n<th scope=\"col\">Total Inventory Value<\/th>\r\n<\/tr>\r\n<tr>\r\n<td>A101<\/td>\r\n<td>Wiring harness<\/td>\r\n<td>99.00<\/td>\r\n<td>30<\/td>\r\n<td>2,970.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>CAB 500<\/td>\r\n<td>HQ Speakers<\/td>\r\n<td>58.00<\/td>\r\n<td>500<\/td>\r\n<td>29,000.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>CAB 600<\/td>\r\n<td>HQ Speakers<\/td>\r\n<td>99.00<\/td>\r\n<td>15<\/td>\r\n<td>1,485.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>MMM 333<\/td>\r\n<td>GPS enabled sound system<\/td>\r\n<td>1,255.50<\/td>\r\n<td>65<\/td>\r\n<td>81,607.50<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Rel 5<\/td>\r\n<td>HQ Speakers<\/td>\r\n<td>110.00<\/td>\r\n<td>100<\/td>\r\n<td>11,000.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>RFS-212<\/td>\r\n<td>GPS enabled sound system<\/td>\r\n<td>650.00<\/td>\r\n<td>150<\/td>\r\n<td>97,500.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>XPS-101<\/td>\r\n<td>GPS enabled sound system<\/td>\r\n<td>103.50<\/td>\r\n<td>200<\/td>\r\n<td>20,700.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<th colspan=\"4\" scope=\"row\">Total Inventory Value<\/th>\r\n<td>$ 244,262.50<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\nThe subsidiary ledger should (MUST) match the GL control account as we make the entry to both ledgers.\r\n\r\n&nbsp;\r\n\r\n<a href=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5107\/2020\/10\/21220544\/Screen-Shot-2021-04-21-at-3.05.12-PM.png\"><img class=\"alignnone wp-image-6732\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5107\/2020\/10\/21220544\/Screen-Shot-2021-04-21-at-3.05.12-PM-300x103.png\" alt=\"T account for inventory. On the debit side, there is an entry of 223,562.50 dollars. On the debit side, there is an entry of 20,700 dollars. On the credit side, there is a note stating 'The credit side of this entry went to accounts payable'. There is a debit total of 244,262.50 dollars.\" width=\"705\" height=\"242\" \/><\/a>\r\n\r\n&nbsp;\r\n\r\nThe GL account doesn\u2019t give us the details we need. We rely on the subsidiary ledger for that.\r\n\r\nNext, we return 40 units and post the journal entry to both ledgers:\r\n<table class=\"fin-table gridded\"><caption class=\"u-clearfix\"><span style=\"text-transform: uppercase;\">Journal<\/span><span style=\"float: right;\">Page 101<\/span><\/caption>\r\n<thead>\r\n<tr aria-hidden=\"true\">\r\n<td colspan=\"5\"><\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"col\">Date<\/th>\r\n<th scope=\"col\">Description<\/th>\r\n<th scope=\"col\">Post. Ref.<\/th>\r\n<th scope=\"col\">Debit<\/th>\r\n<th scope=\"col\">Credit<\/th>\r\n<\/tr>\r\n<\/thead>\r\n<tbody>\r\n<tr>\r\n<td>20--<\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Dec 26<\/th>\r\n<td>Accounts Payable<\/td>\r\n<td class=\"r\"><\/td>\r\n<td class=\"r\">4,000.00<\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<th><span class=\"u-sr-only\">Dec 26<\/span><\/th>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Merchandise Inventory<\/td>\r\n<td><\/td>\r\n<td class=\"r\"><\/td>\r\n<td class=\"r\">4,000.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<th><span class=\"u-sr-only\">Dec 26<\/span><\/th>\r\n<td>To record return on 40 XPS-101 to Bryant C.M 12-3--G<\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr aria-hidden=\"true\">\r\n<td colspan=\"5\"><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\nOur inventory list (subsidiary ledger) looks like this:\r\n<div align=\"left\">\r\n<table class=\"fin-table gridded\"><caption>Inventory List<\/caption>\r\n<tbody>\r\n<tr>\r\n<td style=\"text-align: left;\" colspan=\"5\"><strong>Geyer, Co.<\/strong><\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"text-align: right;\" colspan=\"5\"><strong>12\/19\/20XX<\/strong><\/td>\r\n<\/tr>\r\n<tr aria-hidden=\"true\">\r\n<td colspan=\"5\"><\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"col\">Product ID<\/th>\r\n<th scope=\"col\">Description<\/th>\r\n<th scope=\"col\">Unit Cost<\/th>\r\n<th scope=\"col\">Quantity in Stock<\/th>\r\n<th scope=\"col\">Total Inventory Value<\/th>\r\n<\/tr>\r\n<tr>\r\n<td>A101<\/td>\r\n<td>Wiring harness<\/td>\r\n<td>99.00<\/td>\r\n<td>30<\/td>\r\n<td>2,970.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>CAB 500<\/td>\r\n<td>HQ Speakers<\/td>\r\n<td>58.00<\/td>\r\n<td>500<\/td>\r\n<td>29,000.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>CAB 600<\/td>\r\n<td>HQ Speakers<\/td>\r\n<td>99.00<\/td>\r\n<td>15<\/td>\r\n<td>1,485.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>MMM 333<\/td>\r\n<td>GPS enabled sound system<\/td>\r\n<td>1,255.50<\/td>\r\n<td>65<\/td>\r\n<td>81,607.50<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Rel 5<\/td>\r\n<td>HQ Speakers<\/td>\r\n<td>110.00<\/td>\r\n<td>100<\/td>\r\n<td>11,000.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>RFS-212<\/td>\r\n<td>GPS enabled sound system<\/td>\r\n<td>650.00<\/td>\r\n<td>150<\/td>\r\n<td>97,500.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>XPS-101<\/td>\r\n<td>GPS enabled sound system<\/td>\r\n<td>104.375<\/td>\r\n<td>160<\/td>\r\n<td>16,700.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<th colspan=\"4\" scope=\"row\">Total Inventory Value<\/th>\r\n<td>$ 240,262.50<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\nAnd matches the GL control account:\r\n\r\n<a href=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5107\/2020\/10\/12184013\/Purchases-Under-a-Perpetual-System2.png\"><img class=\"alignnone size-full wp-image-5646\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5107\/2020\/10\/12184013\/Purchases-Under-a-Perpetual-System2.png\" alt=\"T account for inventory. On the debit side, there is an entry of 223,562.50 dollars. On the debit side, there is an entry of 20,700 dollars. On the credit side, there is an entry of 4,000 dollars with a note stating 'the debit went to the accounts payable account'. There is a debit total of 240,262.50 dollars.\" width=\"896\" height=\"270\" \/><\/a>\r\n\r\nYou can see how the GL control account would only give you a running total, while the subsidiary ledger gives you the detail by part number, just as the Accounts Receivable subsidiary ledger gives you receivables by customer and the Accounts Payable subsidiary ledger will give you payables (bills) by vendor.\r\n\r\nIn the Accounts Payable subsidiary ledger, we see that we owe Bryan $16,700 on invoice 1258.\r\n\r\nNow let\u2019s see what happens when we pay and take the discount:\r\n<table class=\"fin-table gridded\"><caption class=\"u-clearfix\"><span style=\"text-transform: uppercase;\">Journal<\/span><span style=\"float: right;\">Page 101<\/span><\/caption>\r\n<thead>\r\n<tr aria-hidden=\"true\">\r\n<td colspan=\"5\"><\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"col\">Date<\/th>\r\n<th scope=\"col\">Description<\/th>\r\n<th scope=\"col\">Post. Ref.<\/th>\r\n<th scope=\"col\">Debit<\/th>\r\n<th scope=\"col\">Credit<\/th>\r\n<\/tr>\r\n<\/thead>\r\n<tbody>\r\n<tr>\r\n<td>20--<\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Dec 29<\/th>\r\n<td>Accounts Payable<\/td>\r\n<td class=\"r\"><\/td>\r\n<td class=\"r\">16,700.00<\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<th><span class=\"u-sr-only\">Dec 29<\/span><\/th>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Merchandise Inventory<\/td>\r\n<td><\/td>\r\n<td class=\"r\"><\/td>\r\n<td class=\"r highlight\">320.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<th><span class=\"u-sr-only\">Dec 29<\/span><\/th>\r\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Checking Account<\/td>\r\n<td><\/td>\r\n<td class=\"r\"><\/td>\r\n<td class=\"r\">16,380.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<th><span class=\"u-sr-only\">Dec 29<\/span><\/th>\r\n<td>To record payment on Bryan inv. 1258<\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr aria-hidden=\"true\">\r\n<td colspan=\"5\"><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\nWe (our computer, actually) posts the entry to the ledgers:\r\n<table class=\"fin-table tchart\"><caption>Inventory<\/caption>\r\n<thead>\r\n<tr>\r\n<th class=\"u-sr-only\" scope=\"col\">Debit<\/th>\r\n<th class=\"u-sr-only\" scope=\"col\">Credit<\/th>\r\n<\/tr>\r\n<\/thead>\r\n<tbody>\r\n<tr>\r\n<td class=\"r\">223,562.50<\/td>\r\n<td class=\"r\"><\/td>\r\n<\/tr>\r\n<tr>\r\n<td class=\"r\">20,700.00<\/td>\r\n<td class=\"r\"><\/td>\r\n<\/tr>\r\n<tr>\r\n<td class=\"r\"><\/td>\r\n<td class=\"r\">4,000.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<td class=\"r\"><\/td>\r\n<td class=\"r highlight\">320.00<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<tfoot>\r\n<tr>\r\n<td class=\"r\"><span class=\"u-sr-only\">Double line<\/span> 239,942.50<\/td>\r\n<td class=\"r\"><span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<\/tr>\r\n<\/tfoot>\r\n<\/table>\r\n<div align=\"left\">\r\n<table class=\"fin-table gridded\"><caption>Inventory List<\/caption>\r\n<tbody>\r\n<tr>\r\n<td style=\"text-align: left;\" colspan=\"5\"><strong>Geyer, Co.<\/strong><\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"text-align: right;\" colspan=\"5\"><strong>12\/19\/20XX<\/strong><\/td>\r\n<\/tr>\r\n<tr aria-hidden=\"true\">\r\n<td colspan=\"5\"><\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"col\">Product ID<\/th>\r\n<th scope=\"col\">Description<\/th>\r\n<th scope=\"col\">Cost<\/th>\r\n<th scope=\"col\">Quantity in Stock<\/th>\r\n<th scope=\"col\">Total Inventory Value<\/th>\r\n<\/tr>\r\n<tr>\r\n<td>A101<\/td>\r\n<td>Wiring harness<\/td>\r\n<td>99.00<\/td>\r\n<td>30<\/td>\r\n<td>2,970.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>CAB 500<\/td>\r\n<td>HQ Speakers<\/td>\r\n<td>58.00<\/td>\r\n<td>500<\/td>\r\n<td>29,000.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>CAB 600<\/td>\r\n<td>HQ Speakers<\/td>\r\n<td>99.00<\/td>\r\n<td>15<\/td>\r\n<td>1,485.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>MMM 333<\/td>\r\n<td>GPS enabled sound system<\/td>\r\n<td>1,255.50<\/td>\r\n<td>65<\/td>\r\n<td>81,607.50<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>Rel 5<\/td>\r\n<td>HQ Speakers<\/td>\r\n<td>110.00<\/td>\r\n<td>100<\/td>\r\n<td>11,000.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>RFS-212<\/td>\r\n<td>GPS enabled sound system<\/td>\r\n<td>650.00<\/td>\r\n<td>150<\/td>\r\n<td>97,500.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>XPS-101<\/td>\r\n<td>GPS enabled sound system<\/td>\r\n<td>102.375<\/td>\r\n<td>160<\/td>\r\n<td>16,380.00<\/td>\r\n<\/tr>\r\n<tr>\r\n<th colspan=\"4\" scope=\"row\">Total Inventory Value<\/th>\r\n<td>$ 239,942.50<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\nUsing the net method would be similar; it would just post the net at first, and adjust the cost of merchandise inventory upward if the accounting staff missed the deadline.\r\n\r\n<section class=\"textbox tryIt\" aria-label=\"Try It\">[ohm2_question hide_question_numbers=1]25171[\/ohm2_question]\r\n[ohm_question hide_question_numbers=1]204490[\/ohm_question]<\/section><section class=\"textbox watchIt\" aria-label=\"Watch It\">Here is a video review of accounting for purchases under a perpetual inventory system:<iframe src=\"\/\/plugin.3playmedia.com\/show?mf=5475495&amp;p3sdk_version=1.10.1&amp;p=20361&amp;pt=375&amp;video_id=3j-CG84f988&amp;video_target=tpm-plugin-1k6gjyac-3j-CG84f988\" width=\"800px\" height=\"450px\" frameborder=\"0\" marginwidth=\"0px\" marginheight=\"0px\" data-mce-fragment=\"1\"><\/iframe>You can view the <a href=\"https:\/\/course-building.s3-us-west-2.amazonaws.com\/Financial+Accounting\/Transcripts\/PerpetualInventorySystemAndHowTo_transcript.txt\" target=\"_blank\" rel=\"noopener\">transcript for \"Perpetual Inventory System and How to Journalize Purchase Entries (FA Tutorial #30)\" here (opens in new window)<\/a>.\r\n\r\n<\/section>","rendered":"<section class=\"textbox learningGoals\" aria-label=\"Learning Goals\">\n<ul>\n<li>Record Purchases under a perpetual system<\/li>\n<\/ul>\n<\/section>\n<p>&nbsp;<\/p>\n<p>In previous sections, we\u2019ve been using the periodic system to record Bryan Wholesale Co. and Geyer, Co. transactions. Let\u2019s continue to use the same companies and record this invoice using a perpetual system for Geyer, Co.:<\/p>\n<figure id=\"attachment_5420\" aria-describedby=\"caption-attachment-5420\" style=\"width: 670px\" class=\"wp-caption aligncenter\"><a href=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5107\/2020\/10\/09173012\/Screen-Shot-2020-11-09-at-9.28.51-AM.png\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-5420 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5107\/2020\/10\/09173012\/Screen-Shot-2020-11-09-at-9.28.51-AM.png\" alt=\"See the caption for the long description.\" width=\"670\" height=\"739\" \/><\/a><figcaption id=\"caption-attachment-5420\" class=\"wp-caption-text\">See the <a href=\"https:\/\/docs.google.com\/document\/d\/1m8DW0MlHb0twBhUBrXBmHM1_5rZkSDPOkL3YtMKOGYc\/edit?usp=sharing\" target=\"_blank\" rel=\"noopener\">invoice long description<\/a> here.<\/figcaption><\/figure>\n<table class=\"fin-table gridded\">\n<caption class=\"u-clearfix\"><span style=\"text-transform: uppercase;\">Journal<\/span><span style=\"float: right;\">Page 101<\/span><\/caption>\n<thead>\n<tr aria-hidden=\"true\">\n<td colspan=\"5\"><\/td>\n<\/tr>\n<tr>\n<th scope=\"col\">Date<\/th>\n<th scope=\"col\">Description<\/th>\n<th scope=\"col\">Post. Ref.<\/th>\n<th scope=\"col\">Debit<\/th>\n<th scope=\"col\">Credit<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>20XX<\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Dec 19<\/th>\n<td>Merchandise Inventory<\/td>\n<td class=\"r\"><\/td>\n<td class=\"r\">20,700.00<\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<th><span class=\"u-sr-only\">Dec 19<\/span><\/th>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Accounts Payable<\/td>\n<td><\/td>\n<td class=\"r\"><\/td>\n<td class=\"r\">20,700.00<\/td>\n<\/tr>\n<tr>\n<th><span class=\"u-sr-only\">Dec 19<\/span><\/th>\n<td>To record purchase of XPS-101 from Bryan Whls 200 count<\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr aria-hidden=\"true\">\n<td colspan=\"5\"><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>This invoice looks logical and simple, and it is, except we also have to keep a subsidiary ledger listing all the items in stock and the assigned cost. The subsidiary ledger might look something like this:<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table gridded\">\n<caption>Inventory List<\/caption>\n<tbody>\n<tr>\n<td style=\"text-align: left;\" colspan=\"5\"><strong>Geyer, Co.<\/strong><\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: right;\" colspan=\"5\"><strong>12\/19\/20XX<\/strong><\/td>\n<\/tr>\n<tr aria-hidden=\"true\">\n<td colspan=\"5\"><\/td>\n<\/tr>\n<tr>\n<th scope=\"col\">Product ID<\/th>\n<th scope=\"col\">Description<\/th>\n<th scope=\"col\">Unit Cost<\/th>\n<th scope=\"col\">Quantity in Stock<\/th>\n<th scope=\"col\">Total Inventory Value<\/th>\n<\/tr>\n<tr>\n<td>A101<\/td>\n<td>Wiring harness<\/td>\n<td>99.00<\/td>\n<td>30<\/td>\n<td>2,970.00<\/td>\n<\/tr>\n<tr>\n<td>CAB 500<\/td>\n<td>HQ Speakers<\/td>\n<td>58.00<\/td>\n<td>500<\/td>\n<td>29,000.00<\/td>\n<\/tr>\n<tr>\n<td>CAB 600<\/td>\n<td>HQ Speakers<\/td>\n<td>99.00<\/td>\n<td>15<\/td>\n<td>1,485.00<\/td>\n<\/tr>\n<tr>\n<td>MMM 333<\/td>\n<td>GPS enabled sound system<\/td>\n<td>1,255.50<\/td>\n<td>65<\/td>\n<td>81,607.50<\/td>\n<\/tr>\n<tr>\n<td>Rel 5<\/td>\n<td>HQ Speakers<\/td>\n<td>110.00<\/td>\n<td>100<\/td>\n<td>11,000.00<\/td>\n<\/tr>\n<tr>\n<td>RFS-212<\/td>\n<td>GPS enabled sound system<\/td>\n<td>650.00<\/td>\n<td>150<\/td>\n<td>97,500.00<\/td>\n<\/tr>\n<tr>\n<td>XPS-101<\/td>\n<td>GPS enabled sound system<\/td>\n<td>103.50<\/td>\n<td>200<\/td>\n<td>20,700.00<\/td>\n<\/tr>\n<tr>\n<th colspan=\"4\" scope=\"row\">Total Inventory Value<\/th>\n<td>$ 244,262.50<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>The subsidiary ledger should (MUST) match the GL control account as we make the entry to both ledgers.<\/p>\n<p>&nbsp;<\/p>\n<p><a href=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5107\/2020\/10\/21220544\/Screen-Shot-2021-04-21-at-3.05.12-PM.png\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-6732\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5107\/2020\/10\/21220544\/Screen-Shot-2021-04-21-at-3.05.12-PM-300x103.png\" alt=\"T account for inventory. On the debit side, there is an entry of 223,562.50 dollars. On the debit side, there is an entry of 20,700 dollars. On the credit side, there is a note stating 'The credit side of this entry went to accounts payable'. There is a debit total of 244,262.50 dollars.\" width=\"705\" height=\"242\" \/><\/a><\/p>\n<p>&nbsp;<\/p>\n<p>The GL account doesn\u2019t give us the details we need. We rely on the subsidiary ledger for that.<\/p>\n<p>Next, we return 40 units and post the journal entry to both ledgers:<\/p>\n<table class=\"fin-table gridded\">\n<caption class=\"u-clearfix\"><span style=\"text-transform: uppercase;\">Journal<\/span><span style=\"float: right;\">Page 101<\/span><\/caption>\n<thead>\n<tr aria-hidden=\"true\">\n<td colspan=\"5\"><\/td>\n<\/tr>\n<tr>\n<th scope=\"col\">Date<\/th>\n<th scope=\"col\">Description<\/th>\n<th scope=\"col\">Post. Ref.<\/th>\n<th scope=\"col\">Debit<\/th>\n<th scope=\"col\">Credit<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>20&#8211;<\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Dec 26<\/th>\n<td>Accounts Payable<\/td>\n<td class=\"r\"><\/td>\n<td class=\"r\">4,000.00<\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<th><span class=\"u-sr-only\">Dec 26<\/span><\/th>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Merchandise Inventory<\/td>\n<td><\/td>\n<td class=\"r\"><\/td>\n<td class=\"r\">4,000.00<\/td>\n<\/tr>\n<tr>\n<th><span class=\"u-sr-only\">Dec 26<\/span><\/th>\n<td>To record return on 40 XPS-101 to Bryant C.M 12-3&#8211;G<\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr aria-hidden=\"true\">\n<td colspan=\"5\"><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>Our inventory list (subsidiary ledger) looks like this:<\/p>\n<div style=\"text-align: left;\">\n<table class=\"fin-table gridded\">\n<caption>Inventory List<\/caption>\n<tbody>\n<tr>\n<td style=\"text-align: left;\" colspan=\"5\"><strong>Geyer, Co.<\/strong><\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: right;\" colspan=\"5\"><strong>12\/19\/20XX<\/strong><\/td>\n<\/tr>\n<tr aria-hidden=\"true\">\n<td colspan=\"5\"><\/td>\n<\/tr>\n<tr>\n<th scope=\"col\">Product ID<\/th>\n<th scope=\"col\">Description<\/th>\n<th scope=\"col\">Unit Cost<\/th>\n<th scope=\"col\">Quantity in Stock<\/th>\n<th scope=\"col\">Total Inventory Value<\/th>\n<\/tr>\n<tr>\n<td>A101<\/td>\n<td>Wiring harness<\/td>\n<td>99.00<\/td>\n<td>30<\/td>\n<td>2,970.00<\/td>\n<\/tr>\n<tr>\n<td>CAB 500<\/td>\n<td>HQ Speakers<\/td>\n<td>58.00<\/td>\n<td>500<\/td>\n<td>29,000.00<\/td>\n<\/tr>\n<tr>\n<td>CAB 600<\/td>\n<td>HQ Speakers<\/td>\n<td>99.00<\/td>\n<td>15<\/td>\n<td>1,485.00<\/td>\n<\/tr>\n<tr>\n<td>MMM 333<\/td>\n<td>GPS enabled sound system<\/td>\n<td>1,255.50<\/td>\n<td>65<\/td>\n<td>81,607.50<\/td>\n<\/tr>\n<tr>\n<td>Rel 5<\/td>\n<td>HQ Speakers<\/td>\n<td>110.00<\/td>\n<td>100<\/td>\n<td>11,000.00<\/td>\n<\/tr>\n<tr>\n<td>RFS-212<\/td>\n<td>GPS enabled sound system<\/td>\n<td>650.00<\/td>\n<td>150<\/td>\n<td>97,500.00<\/td>\n<\/tr>\n<tr>\n<td>XPS-101<\/td>\n<td>GPS enabled sound system<\/td>\n<td>104.375<\/td>\n<td>160<\/td>\n<td>16,700.00<\/td>\n<\/tr>\n<tr>\n<th colspan=\"4\" scope=\"row\">Total Inventory Value<\/th>\n<td>$ 240,262.50<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>And matches the GL control account:<\/p>\n<p><a href=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5107\/2020\/10\/12184013\/Purchases-Under-a-Perpetual-System2.png\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-5646\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5107\/2020\/10\/12184013\/Purchases-Under-a-Perpetual-System2.png\" alt=\"T account for inventory. On the debit side, there is an entry of 223,562.50 dollars. On the debit side, there is an entry of 20,700 dollars. On the credit side, there is an entry of 4,000 dollars with a note stating 'the debit went to the accounts payable account'. There is a debit total of 240,262.50 dollars.\" width=\"896\" height=\"270\" \/><\/a><\/p>\n<p>You can see how the GL control account would only give you a running total, while the subsidiary ledger gives you the detail by part number, just as the Accounts Receivable subsidiary ledger gives you receivables by customer and the Accounts Payable subsidiary ledger will give you payables (bills) by vendor.<\/p>\n<p>In the Accounts Payable subsidiary ledger, we see that we owe Bryan $16,700 on invoice 1258.<\/p>\n<p>Now let\u2019s see what happens when we pay and take the discount:<\/p>\n<table class=\"fin-table gridded\">\n<caption class=\"u-clearfix\"><span style=\"text-transform: uppercase;\">Journal<\/span><span style=\"float: right;\">Page 101<\/span><\/caption>\n<thead>\n<tr aria-hidden=\"true\">\n<td colspan=\"5\"><\/td>\n<\/tr>\n<tr>\n<th scope=\"col\">Date<\/th>\n<th scope=\"col\">Description<\/th>\n<th scope=\"col\">Post. Ref.<\/th>\n<th scope=\"col\">Debit<\/th>\n<th scope=\"col\">Credit<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>20&#8211;<\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Dec 29<\/th>\n<td>Accounts Payable<\/td>\n<td class=\"r\"><\/td>\n<td class=\"r\">16,700.00<\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<th><span class=\"u-sr-only\">Dec 29<\/span><\/th>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Merchandise Inventory<\/td>\n<td><\/td>\n<td class=\"r\"><\/td>\n<td class=\"r highlight\">320.00<\/td>\n<\/tr>\n<tr>\n<th><span class=\"u-sr-only\">Dec 29<\/span><\/th>\n<td>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Checking Account<\/td>\n<td><\/td>\n<td class=\"r\"><\/td>\n<td class=\"r\">16,380.00<\/td>\n<\/tr>\n<tr>\n<th><span class=\"u-sr-only\">Dec 29<\/span><\/th>\n<td>To record payment on Bryan inv. 1258<\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr aria-hidden=\"true\">\n<td colspan=\"5\"><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>We (our computer, actually) posts the entry to the ledgers:<\/p>\n<table class=\"fin-table tchart\">\n<caption>Inventory<\/caption>\n<thead>\n<tr>\n<th class=\"u-sr-only\" scope=\"col\">Debit<\/th>\n<th class=\"u-sr-only\" scope=\"col\">Credit<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td class=\"r\">223,562.50<\/td>\n<td class=\"r\"><\/td>\n<\/tr>\n<tr>\n<td class=\"r\">20,700.00<\/td>\n<td class=\"r\"><\/td>\n<\/tr>\n<tr>\n<td class=\"r\"><\/td>\n<td class=\"r\">4,000.00<\/td>\n<\/tr>\n<tr>\n<td class=\"r\"><\/td>\n<td class=\"r highlight\">320.00<\/td>\n<\/tr>\n<\/tbody>\n<tfoot>\n<tr>\n<td class=\"r\"><span class=\"u-sr-only\">Double line<\/span> 239,942.50<\/td>\n<td class=\"r\"><span class=\"u-sr-only\">Double line<\/span><\/td>\n<\/tr>\n<\/tfoot>\n<\/table>\n<div style=\"text-align: left;\">\n<table class=\"fin-table gridded\">\n<caption>Inventory List<\/caption>\n<tbody>\n<tr>\n<td style=\"text-align: left;\" colspan=\"5\"><strong>Geyer, Co.<\/strong><\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: right;\" colspan=\"5\"><strong>12\/19\/20XX<\/strong><\/td>\n<\/tr>\n<tr aria-hidden=\"true\">\n<td colspan=\"5\"><\/td>\n<\/tr>\n<tr>\n<th scope=\"col\">Product ID<\/th>\n<th scope=\"col\">Description<\/th>\n<th scope=\"col\">Cost<\/th>\n<th scope=\"col\">Quantity in Stock<\/th>\n<th scope=\"col\">Total Inventory Value<\/th>\n<\/tr>\n<tr>\n<td>A101<\/td>\n<td>Wiring harness<\/td>\n<td>99.00<\/td>\n<td>30<\/td>\n<td>2,970.00<\/td>\n<\/tr>\n<tr>\n<td>CAB 500<\/td>\n<td>HQ Speakers<\/td>\n<td>58.00<\/td>\n<td>500<\/td>\n<td>29,000.00<\/td>\n<\/tr>\n<tr>\n<td>CAB 600<\/td>\n<td>HQ Speakers<\/td>\n<td>99.00<\/td>\n<td>15<\/td>\n<td>1,485.00<\/td>\n<\/tr>\n<tr>\n<td>MMM 333<\/td>\n<td>GPS enabled sound system<\/td>\n<td>1,255.50<\/td>\n<td>65<\/td>\n<td>81,607.50<\/td>\n<\/tr>\n<tr>\n<td>Rel 5<\/td>\n<td>HQ Speakers<\/td>\n<td>110.00<\/td>\n<td>100<\/td>\n<td>11,000.00<\/td>\n<\/tr>\n<tr>\n<td>RFS-212<\/td>\n<td>GPS enabled sound system<\/td>\n<td>650.00<\/td>\n<td>150<\/td>\n<td>97,500.00<\/td>\n<\/tr>\n<tr>\n<td>XPS-101<\/td>\n<td>GPS enabled sound system<\/td>\n<td>102.375<\/td>\n<td>160<\/td>\n<td>16,380.00<\/td>\n<\/tr>\n<tr>\n<th colspan=\"4\" scope=\"row\">Total Inventory Value<\/th>\n<td>$ 239,942.50<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p>Using the net method would be similar; it would just post the net at first, and adjust the cost of merchandise inventory upward if the accounting staff missed the deadline.<\/p>\n<section class=\"textbox tryIt\" aria-label=\"Try It\"><iframe loading=\"lazy\" id=\"ohm25171\" class=\"resizable\" src=\"https:\/\/ohm.one.lumenlearning.com\/multiembedq.php?id=25171&theme=lumen&iframe_resize_id=ohm25171&source=tnh\" width=\"100%\" height=\"150\"><\/iframe><br \/>\n<iframe loading=\"lazy\" id=\"ohm204490\" class=\"resizable\" src=\"https:\/\/ohm.lumenlearning.com\/multiembedq.php?id=204490&theme=lumen&iframe_resize_id=ohm204490&source=tnh\" width=\"100%\" height=\"150\"><\/iframe><\/section>\n<section class=\"textbox watchIt\" aria-label=\"Watch It\">Here is a video review of accounting for purchases under a perpetual inventory system:<iframe loading=\"lazy\" src=\"\/\/plugin.3playmedia.com\/show?mf=5475495&amp;p3sdk_version=1.10.1&amp;p=20361&amp;pt=375&amp;video_id=3j-CG84f988&amp;video_target=tpm-plugin-1k6gjyac-3j-CG84f988\" width=\"800px\" height=\"450px\" frameborder=\"0\" marginwidth=\"0px\" marginheight=\"0px\" data-mce-fragment=\"1\"><\/iframe>You can view the <a href=\"https:\/\/course-building.s3-us-west-2.amazonaws.com\/Financial+Accounting\/Transcripts\/PerpetualInventorySystemAndHowTo_transcript.txt\" target=\"_blank\" rel=\"noopener\">transcript for &#8220;Perpetual Inventory System and How to Journalize Purchase Entries (FA Tutorial #30)&#8221; here (opens in new window)<\/a>.<\/p>\n<\/section>\n","protected":false},"author":6,"menu_order":13,"template":"","meta":{"_candela_citation":"[{\"type\":\"original\",\"description\":\"Purchases Under a Perpetual System\",\"author\":\"Joseph Cooke\",\"organization\":\"Lumen Learning\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"},{\"type\":\"copyrighted_video\",\"description\":\"Perpetual Inventory System and How to Journalize Purchase Entries\",\"author\":\"NotePirate\",\"organization\":\"\",\"url\":\"https:\/\/youtu.be\/3j-CG84f988\",\"project\":\"\",\"license\":\"arr\",\"license_terms\":\"Standard YouTube License\"}]","pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"part":186,"module-header":"- Select Header -","content_attributions":[{"type":"original","description":"Purchases Under a Perpetual System","author":"Joseph Cooke","organization":"Lumen Learning","url":"","project":"","license":"cc-by","license_terms":""},{"type":"copyrighted_video","description":"Perpetual Inventory System and How to Journalize Purchase Entries","author":"NotePirate","organization":"","url":"https:\/\/youtu.be\/3j-CG84f988","project":"","license":"arr","license_terms":"Standard YouTube License"}],"internal_book_links":[],"video_content":null,"cc_video_embed_content":{"cc_scripts":"","media_targets":[]},"try_it_collection":null,"_links":{"self":[{"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/pressbooks\/v2\/chapters\/199"}],"collection":[{"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/wp\/v2\/users\/6"}],"version-history":[{"count":3,"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/pressbooks\/v2\/chapters\/199\/revisions"}],"predecessor-version":[{"id":927,"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/pressbooks\/v2\/chapters\/199\/revisions\/927"}],"part":[{"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/pressbooks\/v2\/parts\/186"}],"metadata":[{"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/pressbooks\/v2\/chapters\/199\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/wp\/v2\/media?parent=199"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/pressbooks\/v2\/chapter-type?post=199"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/wp\/v2\/contributor?post=199"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/wp\/v2\/license?post=199"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}