Answer :
An alternative to the more straightforward periodic inventory system is the perpetual inventory system, which is used to record inventory transactions. Purchases and sales are recorded in real time in the inventory asset account under the perpetual system.
What is a system of perpetual inventory?
A program known as a perpetual inventory system continuously estimates your inventory using electronic records rather than a physical inventory. This framework begins with the standard from an actual count and updates in light of buys made in and shipments made out.
Credit terms of 3/10, n/30 stipulate that the invoice must be paid in full within 30 days and that a settlement discount of 3 percent may be granted if paid within 10 days of the invoice date. For this situation, the installment was made on the tenth day, so the rebate will be taken.
The settlement discount is only recorded when the payment is made, not when the purchase is recorded, when a company uses the gross method to record purchases.
The inventory asset account is where all purchases, purchase discounts, and returns are recorded in the perpetual inventory system.
Aug. 1 Inventory $60,000 Accounts Payable $60,000 To record the purchase of goods on account Aug. 11 Inventory (purchase discount) = $60,000 x 3/100 $1,800 Cash $58,200
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