{"id":201017,"date":"2025-03-14T09:24:24","date_gmt":"2025-03-14T09:24:24","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=201017"},"modified":"2025-03-14T09:24:26","modified_gmt":"2025-03-14T09:24:26","slug":"a-journal-entry-to-record-the-sale-of-inventory-on-account-will-include-a-2","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/03\/14\/a-journal-entry-to-record-the-sale-of-inventory-on-account-will-include-a-2\/","title":{"rendered":"A journal entry to record the sale of inventory on account will include a"},"content":{"rendered":"\n<p>A journal entry to record the sale of inventory on account will include a<\/p>\n\n\n\n<p>a. debit to inventory.<br>b. debit to accounts receivable.<br>c. debit to sales.<br>d. credit to cost of goods sold.<\/p>\n\n\n\n<p><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-ast-global-color-6-color\"><strong>The correct answer and explanation is :<\/strong><\/mark><\/p>\n\n\n\n<p>The correct answer is <strong>b. debit to accounts receivable.<\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Explanation:<\/h3>\n\n\n\n<p>When a company sells inventory on account, it is recording a sale that will be paid for later. This means the company is extending credit to the customer, which is why <strong>Accounts Receivable<\/strong> is involved. Let\u2019s break down the journal entry for this transaction:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Revenue Recognition<\/strong>:<\/li>\n<\/ol>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Credit to Sales<\/strong>: When inventory is sold, the company earns revenue from the transaction. The appropriate account to recognize this revenue is <strong>Sales<\/strong> (a revenue account). This account is credited to show an increase in sales income.<\/li>\n\n\n\n<li>The corresponding debit for this credit is <strong>Accounts Receivable<\/strong>, which represents the money owed to the company by the customer. Since payment will not be received immediately, the sale is recorded as a receivable.<\/li>\n<\/ul>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Cost of Goods Sold (COGS)<\/strong>:<\/li>\n<\/ol>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Debit to Cost of Goods Sold (COGS)<\/strong>: This is an expense account that represents the cost of the inventory that was sold. It is <strong>debited<\/strong> because the company has incurred an expense by parting with the inventory.<\/li>\n\n\n\n<li><strong>Credit to Inventory<\/strong>: The inventory account is <strong>credited<\/strong> to reflect the decrease in inventory, as the company has sold a portion of its stock.<\/li>\n<\/ul>\n\n\n\n<p>In summary, the journal entry for the sale of inventory on account would be:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Debit<\/strong> Accounts Receivable (because the company is expecting payment in the future).<\/li>\n\n\n\n<li><strong>Credit<\/strong> Sales (to recognize the revenue from the sale).<\/li>\n\n\n\n<li><strong>Debit<\/strong> Cost of Goods Sold (to recognize the expense of the inventory sold).<\/li>\n\n\n\n<li><strong>Credit<\/strong> Inventory (to decrease the inventory on hand).<\/li>\n<\/ul>\n\n\n\n<p>Therefore, the correct choice is <strong>b. debit to accounts receivable<\/strong>, as it reflects the increase in the amount the company expects to collect from the customer in the future.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>A journal entry to record the sale of inventory on account will include a a. debit to inventory.b. debit to accounts receivable.c. debit to sales.d. credit to cost of goods sold. The correct answer and explanation is : The correct answer is b. debit to accounts receivable. Explanation: When a company sells inventory on account, [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-201017","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/201017","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=201017"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/201017\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=201017"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=201017"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=201017"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}