Journal Entry for Purchase of Inventory | Perpetual Inventory System

This video shows how to record the journal entry for inventory purchases when inventory is purchased on account (a credit purchase) and when inventory is purchased for cash (a cash purchase).  In both cases the inventory account is debited when inventory is acquired, but "Accounts Payable" is credited for purchases on account whereas "Cash" is credited when the inventory is immediately paid for in cash.

The company also shows how the journal entry for an inventory purchase differs for a retailer versus a manufacturer (the retailer debits the "Inventory" account whereas the manufacturer debits "Raw Materials Inventory").  

The video also reminds the viewer that inventory is initially recorded at its cost, which includes not just the purchase price but the cost of shipping the inventory to its intended location (freight-in) and getting the inventory ready for sale (inspection and preparation costs).
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