In a perpetual inventory system, which accounts are updated with each sale?

• A. Inventory only
• B. Purchases only
• C. Sales Revenue only
• D. COGS and Inventory

Answer: (D)

In a perpetual inventory system, the cost side of a sale is recorded immediately, so the two accounts that are updated are Inventory and Cost of Goods Sold. When a sale occurs, you reduce the inventory by the cost of the items sold (credit Inventory) and recognize that cost as an expense (debit COGS). At the same time, you would also record the revenue from the sale in Sales Revenue and the corresponding cash or accounts receivable, but the question focused on the accounts affected for the cost flow and asset impact. This approach keeps inventory balances accurate and matches the expense to the revenue it helped generate.