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 statements best describes how the cost of goods sold (COGS) is determined under the perpetual inventory system compared to the periodic inventory system?

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

The perpetual system requires a physical inventory count to determine COGS, while the periodic system does not.

Under both systems, COGS is only calculated at the end of the accounting period.

COGS is not recorded in the perpetual system until the end of the year.

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Verified step by step guidance

Step 1: Understand the concept of Cost of Goods Sold (COGS). COGS represents the direct costs attributable to the production of goods sold by a company, including materials and labor costs.

Step 2: Learn the perpetual inventory system. In this system, inventory records are updated continuously as transactions occur. COGS is recorded immediately with each sale, reflecting real-time inventory changes.

Step 3: Learn the periodic inventory system. In this system, inventory records are updated only at the end of the accounting period. COGS is calculated by subtracting ending inventory from the sum of beginning inventory and purchases during the period.

Step 4: Compare the two systems. Under the perpetual system, COGS is updated continuously, requiring detailed tracking of inventory. Under the periodic system, COGS is calculated at the end of the period, based on a physical inventory count.

Step 5: Clarify misconceptions. The perpetual system does not require a physical inventory count to determine COGS for each sale, but periodic physical counts may be conducted for accuracy. The periodic system relies on a physical count at the end of the period to calculate COGS.