Giovanni campany buys merchandise on account from Gordon campany. The selling price of the good is 780 birr ,and the cost of good is 560 birr. Both campanies use perpetual inventory system. Journalize the transaction on the book of both campanies.

Answer 1

Giovanni Company's Journal:

Date Account Title & Explanation Debit Credit
------------------------------------------------------------------------
Inventory Acquisition 780
Accounts Payable 780
(To record the acquisition of assets from Gordon's Company on account)

Gordon Company's Journal:

Date Account Title & Explanation Debit Credit
------------------------------------------------------------------------
Accounts Receivable 780
Sales Revenue 780
(To record the sale of merchandise to Giovanni's Company on account)

Cost of Goods Sold 560
Inventory 560
(To record the cost of the sold inventory)