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

One difference between periodic and perpetual inventory systems is that cost of goods sold is:

only recorded at the end of the period in both systems

never recorded in the perpetual system

calculated using the same method and timing in both systems

continuously updated in the perpetual system but determined at period end in the periodic system

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Verified step by step guidance

Understand the key difference between periodic and perpetual inventory systems: The periodic system updates inventory and cost of goods sold (COGS) at the end of the accounting period, while the perpetual system continuously updates inventory and COGS after each transaction.

In the periodic inventory system, purchases are recorded in a temporary account (e.g., Purchases) during the period, and the COGS is calculated at the end of the period using the formula: \( \text{COGS} = \text{Beginning Inventory} + \text{Purchases} - \text{Ending Inventory} \).

In the perpetual inventory system, inventory and COGS are updated in real-time after each sale. The system automatically adjusts inventory levels and calculates COGS based on the cost of the items sold.

Recognize that the timing of recording COGS is the primary distinction: In the periodic system, COGS is determined at the end of the period, while in the perpetual system, COGS is continuously updated.

Apply this understanding to the problem: The correct answer is that COGS is continuously updated in the perpetual system but determined at period end in the periodic system.