This system uses bar codes to keep up to the minute records.
The merchandise inventory account is debited for the cost of all goods purchase,including carriage charges, and credited for the cost of all goods sold. In addition, this account is debited when customer returns, allowances and discounts.Thus, the balance of the account represents the cost of goods sols at all times.
The cost goods sold is debited when goods are sold and credited when goods are returned by customers. Thus,the balance of account reflects the cost of goods sold at any point.