Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

4. Merchandising Operations

Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory

Financial Accounting

4. Merchandising Operations

Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory

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Multiple Choice

Which of the following is NOT a key difference between the calculation of Cost of Goods Sold (COGS) under the perpetual inventory system and the periodic inventory system?

Under the perpetual system, COGS is updated continuously with each sale, while under the periodic system, COGS is determined at the end of the period.

In the periodic system, purchases are recorded directly in the Inventory account, while in the perpetual system, purchases are recorded in a Purchases account.

The perpetual system provides up-to-date inventory balances, while the periodic system only updates inventory balances at period-end.

The perpetual system requires detailed record-keeping of inventory transactions, whereas the periodic system does not track inventory changes in real time.

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Verified step by step guidance

Step 1: Understand the two inventory systems mentioned in the problem. The perpetual inventory system updates inventory and Cost of Goods Sold (COGS) continuously with each transaction, while the periodic inventory system updates these accounts only at the end of the accounting period.

Step 2: Analyze the key differences between the two systems. For example, the perpetual system requires detailed record-keeping for each inventory transaction, whereas the periodic system does not track inventory changes in real time and relies on a physical count at the end of the period.

Step 3: Evaluate the statement about purchases. In the periodic system, purchases are recorded in a Purchases account, not directly in the Inventory account. In contrast, the perpetual system records purchases directly in the Inventory account, reflecting real-time updates.

Step 4: Compare the statements provided in the problem to identify which one is NOT a key difference. Focus on whether the statement aligns with the characteristics of the perpetual and periodic systems.

Step 5: Conclude by identifying the statement that incorrectly describes the systems. This involves recognizing that the periodic system does not record purchases directly in the Inventory account, making this statement inaccurate.