Which accounting entry reflects an internal transfer of costs in receipt accounting?

The choice indicating that an internal transfer of costs in receipt accounting involves debiting inventory and crediting Cost of Goods Sold is accurate because it reflects the proper flow of costs associated with inventory transactions.

In receipt accounting, when goods are received, the costs associated with those goods need to be appropriately accounted for in the financial records. Debiting inventory signifies that the company's stock of goods has increased due to the receipt of these products, which is a fundamental principle in accounting for inventory.

On the other side of the transaction, crediting Cost of Goods Sold acknowledges that this inventory is now an asset on the balance sheet rather than an expense. This transaction indicates that the costs associated with these goods are being transferred from the expense category to an asset category, maintaining the integrity of financial reporting.

This method ensures that the cost flow accurately represents the inventory management and accounting principles within the organization, allowing for better tracking of inventory assets and their associated costs. This is crucial for financial analysis, profit calculation, and inventory valuation. Each internal transfer needs to be tracked clearly to maintain accurate financial statements and reports reflecting the organization's operational activities.