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 inventory costing system is most likely to produce the least cost distortion when tracking the cost of goods sold?

Periodic inventory system

Weighted average system

Perpetual inventory system

Specific identification system

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Verified step by step guidance

Understand the concept of inventory costing systems: Inventory costing systems are methods used to assign costs to inventory and calculate the cost of goods sold (COGS). Common systems include periodic inventory, perpetual inventory, weighted average, and specific identification.

Analyze the periodic inventory system: This system updates inventory records at the end of an accounting period. It may lead to cost distortion because it does not track inventory changes in real-time, making it less accurate for COGS calculations.

Evaluate the weighted average system: This system calculates the average cost of all inventory items and applies it to COGS. While it smooths out cost fluctuations, it may not reflect the actual cost of specific items, leading to potential distortions.

Examine the perpetual inventory system: This system updates inventory records continuously as transactions occur. It provides real-time tracking of inventory and COGS, reducing cost distortion and improving accuracy.

Consider the specific identification system: This system assigns the actual cost of each specific item to COGS. While highly accurate, it is only practical for businesses with unique or high-value items, as it requires detailed tracking of individual inventory items.