) Using a perpetual inventory system, how should a company record the sale of inventory costing $620 for $960 on account? 1. Inventory.             620              Cost of goods sold.           620      Sales revenue.    960              Accounts receivable.        960   2. Accounts receivable.    960             Sales revenue.                    960     Cost of goods sold.       620             Inventory.                             620   3. Inventory.                       620      Gain.                              340            Sales revenue.                   960   4. Accounts Receivable.   960              Sales revenue.                    620              Gain.                                    340

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Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.