Purchasing inventory: periodic and perpetual journal entries
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- čas přidán 7. 09. 2024
- This video explains the differences between the periodic and perpetual methods for recording the purchase, return and payment of inventory. Purchase discounts and terms are also explained. For more help with accounting, please visit my website AccountingInFoc....
You are excellent! you have a different way to make accounting easy.
You know I hate accounting from teachers and people who are working in this field till i stoped reading or listening to anything about accounting . now i'm asking myself why i didnt know your account on youtube before!? my life would change to good!
Thank you! I'm so glad you find it so helpful for you.
@@allkristiningram And I'm glad to know your helpful channel!
This was very helpful in explaining the different between the two!! Thank you immensely!
You're so welcome! Glad it helped!
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Your welcome!
Thanks so much for this video! a bunch of my classmates used this video to understand more the difference of periodic and perpetual since we have a an exam coming up.
Thanks for commenting and sharing! I really appreciate it.
Thanks so much
You're welcome!
Thank you this helped me so much, I just started taking general accounting, and this part is a little confusing, but you helped a lot. Do I use the same method with sales too?
I've got sales on my website Accountinginfocus.com
thank you so much your video was really helpful!! I have a question, will there ever be a time when you have to debit A/P and credit A/P in the same transaction for discounts in the periodic system?
E.g.
Amount owing for invoice is $5,700 and the purchase discount is $57
will the transactions be:
Dr Accounts payable 5,643
Cr Cash at Bank 5,643
Dr Accounts payable 57
Cr Purchases discounts 57
Dr Accounts payable 57
Cr Accounts payable 57
No, because the debit and credit would cancel each other out. You would never debit and credit the same account in the same entry.
@@allkristiningram ahh I see thank you!! 😊
Thanks for the video! For the perpetual system, how often would you be making journal entries into the books if you have lots of different items of inventory and many transactions? On a practical level, would these journal entries be automatically generated in an ERP system (e.g. SAP) -opposed to the accountant having to literally enter the debits and credits for the $3k first transaction for example?
For perpetual, you would adjust when doing financial statements so typically quarterly or annually.
do you have a complete periodic transaction?
On my website, accountinginfocus.com
Thank u so much for the video! Helped me alot:)
+Kevin Calhoun you're welcome. So glad I could help!
Hello Kristin, I have a question: if we use a perpetual method so we decrease our inventory account when we get discount, what happens with COGS when we make a sale? I mean should we divide the value of discount per every item equally?
The discount would effect the cost of the items in the order for which you took the discount. Then you would apply the method (FIFO, LIFO, WA, or SI) to calculate cost of goods sold.
So for example if on 1st May I buy 100 items for 300 each on credit (terms 3/10,n/30) I debit inventory and credit acc payable by the same amount (30000). The next day I sell 10 items so I credit inventory and debit COGS by the same amount. Then, next day I pay for purchase from 1st May, so I get a discount - now I credit inventory, so the cost per every remaining item would be (27000-900)/90 = 290, right?
It depends on which method you use. If the inventory is no longer in inventory because you sold it, you would credit cost of goods sold. If you have not sold it, you would correct the cost per unit by the amount of the discount.
Shouldn't returning be accounts receivable ??
Not when you are purchasing inventory. Your purchases are Accounts Payable. When your customers purchase from you, that's Accounts Receivable.
Thanks I finished my exam yesterday, this video helped a lot btw
Hi how to record inventory shortage in both ?
Under periodic, you won't record the shortage because you won't know how much it is. Under perpetual, you would make an entry to debit Inventory shrinkage or COGS and credit Inventory.
Please do the debit entries first and the credit entries second. Otherwise it gets confusing!
I don't want you to get caught up in the order of the accounts. It's more important to get the accounts correct.
Why don't you keep your debts as the top entry??
James Hartley Entries are recorded by date.
Kristin Ingram when using the balance sheet method for calculating bad debts, is it also important to keep records by date??
Wait, did you mean the debits in the 4/11 entry? Sorry your comment said debts. Your entries should always be in order by date. Most textbooks show debits first then credits when doing entries but in real life, we don't necessarily do it that way. If that is something your professor is picky about, put the debits first. It is more important to have the correct accounts and debits and credits. I am not concerned about the order accounts are listed within the journal entries in my courses.
Kristin Ingram thanks for the clarification
Yeah the for the second question, I was just having trouble finding the bad debt using the balance sheet method. Think i got it now, thanks!
Want to explain it to me so we can make sure you are doing it right? That is something a lot of students have trouble with.