Accouncting

1. What are the differences between perpetual and periodic inventory systems? A perpetual inventory system is continually monitored, so that at any given time you can see how much of each item you have. A periodic inventory system is done once a year, or whenever a count is done. Perpetual allows you to know what you have on hand at all times, while periodic relies on physical counts. 2. Which type of system provides better internal control over inventory and why? Perpetual is better because it allows you to know the balance in your inventory account at any point in time. 3. What is a purchase discount? Use 1/10, n/30 in your explanation. It is a way of providing a cash discount on purchases. It means if the bill is paid within 10 days, there is a 1% discount. Otherwise the total amount is due within 30 days. If $1,000 1/10 net 30 is written on a bill, the buyer can take a 1% discount ($1000 X .01 = $10) and a payment of $990 is due within 10 days, or the full $1000 is due in 30 days. 4. What is the distinction between sales allowances and sales discounts? A sales allowance is given if there is something wrong with the merchandise, or to show the customer you value their business. A sales discount is given to the customer/client when they pay within a specified time. 5. Describe in words the journal entries that are made in a perpetual inventory system when inventory is sold on credit.
A clothing store purchased 1,000 shirts at a cost of $10 each for a total of $10,000
[Debit] Inventory = 10,000
[Credit] Accounts Payable =