Using a perpetual inventory system, the effect of purchasing products on account on the accounting equation includes a rise in liabilities and assets.
- A perpetual inventory system is a program that constantly assesses your inventory using computer information rather than a physical inventory. This method starts with a physical inventory as a baseline and adjusts based on sales and shipments.
- In business and accounting, a perpetual inventory system or continuous inventory system refers to inventory systems in which data on inventory quantity and accessibility is refreshed on a continual basis as a result of doing business.
- A perpetual inventory system continuously monitors your inventory levels. Updates are conducted automatically when you receive or sell merchandise. Purchases and returns are reflected in your inventory accounts promptly. A supermarket, for example, might use a perpetual inventory system.
Thus this is the meaning of perpetual inventory system.
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