XYZ Company uses the periodic inventory system to account for its merchandise purchases. A physical count of inventory at year end revealed that $6,000 of inventory was on hand. Given the partial list of accounts below, show your understanding of the entry to close the temporary debit balance accounts and update the Merchandise Inventory account by selecting all of the correct answers below. (Check all that apply.)

When ownership of products and services is transferred to a consumer on a "credit basis," the debt will be paid in full at a later time.
Credit sales, then, are those transactions carried out by clients who do not make full payment at the time of purchase.

Are credit sales credit or debit?

Sales are recorded as a credit because the offsetting side of the journal entry is a debit usually to either the cash or accounts receivable account.
In essence, the debit increases one of the asset accounts, while the credit increases shareholders' equity.

A credit purchase, also referred to as buying something "on credit," is when you order something that you will receive today but have to pay for later.
For instance, when you use a credit card, your financial institution purchases the items or services in advance and then bills you for the money.

Payments for credit sales are made several days or weeks after a product is delivered.
In contrast to payments made right away in cash, short-term credit agreements are recorded as accounts receivable on a company's balance sheet.

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